Despite little change in new home supply, the share of new home sales to total sales in 2023 rose to the highest level in years. Through October, 14% of total home sales in the major So CA markets were new homes. This is up from 9% in 2021 – 2022 and 7% in 2017 – 2018. Even more striking, new home project counts are actually below 2017 – 2020 levels.
Q2 Real Estate Analysis
Clarity Real Estate Advisors presents these key findings as part of their real estate analysis, to highlight the remarkable dynamic of Southern California’s New Home Market and showcasing a sustained rebound in Q2.
New Home Sales Remain Robust
Buyers have accepted the higher interest rate environment and have limited options in the resale market. New home sales in Southern CA have averaged 3.9/mo/project since January which is above the 2016 – 2019 average (3.3/mo/project). Strong sales are giving builders pricing power once again.
Cancellations are low
After spiking to over 30% in October and November of last year, cancellations have stabilized at below average levels (11 – 12%). A cancellation rate in the 10 – 15% range is considered typical historically. According to builders, most buyers are qualified at current interest rates and have limited options in the resale market.
new home projects near record lows
There are currently just 478 actively selling new home projects in southern California vs. 1,710 at the peak of the market in 2007. New supply is being curbed by a declining supply of land available for new home development, combined with rapid new home sales, and a lack of political will to approve new home communities. In addition, the average size of a typical subdivision has shrunk from about 120 homes a few decades ago to only about 75 today.
