The new home market started the year hot, driven by a slight decline in mortgage rates, limited supply, a decline in cancellation rates and renewed buyer optimism. New home builders’ ability to offer below market mortgage rates also continues to play a role in making new homes more attractive than resales. January new home sales in all of the major Southern CA markets, which averaged 3.8/mo/project, topped the average from 2016 to 2023 for the same month (3.0/mo). Orange County is leading the pack with an average of 4.5 sales/mo/project in January (vs. 3.0/mo average).
Partially driving the higher net new home sales, cancellations in the first month of the year came in well below the average over the prior seven years (for the same month). Cancellations can be seen as a barometer of home buyer confidence in the market, along with current supply conditions (both new and resale). Cancellations in Los Angeles and Orange County were particularly low in January (6% vs. 11 – 14% avg).
The most successful projects offer attainably-priced higher-density attached product in core infill locations or affordably priced single-family homes in more tertiary submarkets. The following single-family detached neighborhoods stood out with 12+ home sales in January, all with price points in the high-$400Ks to high-$500Ks.
· Marbella Pointe by DR Horton (Lancaster) – 13 sales
· Baywood at Morgan Crossing by Pulte (Hemet) – 16 sales
· Augusta at the Fairways by DR Horton (Beaumont) – 15 sales
· Pradera Pointe by DR Horton (Winchester) – 12 sales
Elevated new home demand to start the year should be a prelude to a strong Spring selling season.
Clarity is the premier real estate market advisor on the West Coast. If you have any questions, please contact Pete Reeb (858) 774-7126, pete@ask-clarity.com, or Adam Artunian (949) 861-1876, adam@ask-clarity.com.