Homebuilder Lennar’s average selling price has dropped by 19.5% from the peak three years ago.
By Wolf Richter for WOLF STREET.
New single-family homes for sale at all stages of construction rose to 505,000 homes in July, the highest since October 2007. But back then during the Housing Bust, inventories were on the way down, as homebuilders were trying to stay alive by cutting back construction.
Compared to a year ago, inventories were up by 8.1%, compared to July 2019, inventories were up by 54%.
New completed single-family homes for sale jumped to 118,000 homes in July, up by 55% from July 2019, just behind November 2024.
Inventory for sale of these “spec homes” has been in this range since October 2024.
Prices fell, even without including incentives.
The median contract price dropped by 5.9% year-over-year to $403,800 in July (blue in the chart below).
The three-month average, which irons out some of the month-to-month squiggles, dropped to $411,400 (red), down by 1.8% year-over-year and by 5.9% from the peak in late 2022. This price level was first seen in November 2021.
But the Census Bureau tracks sales prices of new houses by the prices written into purchase contracts that buyers signed. These contract prices do not include the costs of mortgage-rate buydowns and some other incentives. With the costs of the buydowns and incentives included, home prices fell far further – we know that from builders quarterly financial reports (for Lennar and D.R. Horton, see below).
So these contract prices overstate the effective sales prices and understate the effective price drops. And still, they’ve been coming down, even with massive incentive costs not included.
The price explosion during the pandemic, when people were willing to pay whatever, had led to a explosion of profit margins at homebuilders. Those profit margins are now getting trimmed back, and net profits have fallen.
And including incentives…
Homebuilders have been trying to stimulate demand with big incentives and costly mortgage-rate buydowns.
Lennar disclosed that its incentive spending jumped to 13.3% of revenues in Q2, “primarily” due to mortgage-rate buydowns, the highest incentive spending rate since 2009.
Lennar’s average sales price dropped to $389,000, down by 19.5% from the peak in Q2 2022 and is back where it had been in Q2 2020, having given up the entire 2020-2022 price explosion. Average selling price includes the incentives.
D.R. Horton reported that the average selling price per home sold declined by 3.3% year-over-year, and by 11.1% from the peak in its fiscal Q3 2022, to $369,600 in the quarter ended June 30. Average selling price includes the incentives:
Sales have hung in there, thanks to the deals.
Sales of new homes fell by 8.2% year-over-year to 56,000 contracts signed in July, not seasonally adjusted, and were down by 1.8% from July 2019 – still in a mediocre to decent range, rather than in the deep-plunge to rock-bottom range of existing homes.
So efforts by homebuilders to stimulate demand via lower prices, mortgage-rate buydowns, and incentives have worked to some extent to prevent the kind of plunge in demand for existing homes. See: Sales of Existing Single-Family Homes Crushed, Supply Highest since 2016. Condo Sales Near Low in the Data, Supply Highest since Housing Bust. Prices Begin to Bend
Homebuilders have to maintain their businesses, and they have to find the mix of price points and incentives at which they can sell, and they sacrifice some of their fat profits to get there. They cannot decide to just outwait this market.
Inventory for sale by region.
In the South, inventories of new houses for sale spiked to a record of 312,000 in July, up by 79% from July 2019. Inventory has been above the Housing Bust peak for over a year.
The Census region, which is dominated by the mega-housing markets of Texas and Florida, accounted for 62% of total US new-home inventory, and for 57% of total US new-home sales (a map of the four Census regions is below the article at the top of the comments).
Sales dropped by 6% year-over-year to 32,000 new homes, and also by 6% from July 2019. The incentives that homebuilders are piling onto this market are keeping sales at decent levels.
In the West, inventories of new homes for sale have declined somewhat since the end of 2024, to 111,000, but were still up 4.7% year-over-year, up by 28% from July 2019.
Sales in the West dropped by 19% year-over-year to 13,000 new homes but were level with July 2019. Here too, lower price points and incentives have helped keeping sales at mediocre to decent levels.
The West, dominated by California, accounted for 22% of the total US inventory and for 23% of total US sales.
In the Midwest, inventories of new homes for sale in July jumped by 27.5% year-over-year and by 38% from July 2019 to 51,000 new homes, the highest since February 2009:
In the Northeast, inventory jumped by 19% year-over-year and by 7% from July 2019, to 31,000 new homes.
The Northeast is a relatively small area with big densely populated cities where multifamily housing (condos and apartments) is a far bigger part of new construction than single-family housing.
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The promised map of the four Census regions of the US:
In time, people will realize that this is the housing bubble of all housing bubbles. The mother of all bubbles. The Great Financial Abomination. Thr bubble to end all bubbles. TEOTWAWKI in housing.
Nah this time is different and people in many areas will also day their area will be different and immune to correction or crash as well.. Time will tell
If inflation really takes off then many of us holding low interest loans might just ride it out on the sidelines. If money moves out of stocks, I suspect a good portion might just head into real estate. Never underestimate the power of property to bubble higher.
I dont think so.
Extreme un affordability with job insecurity would paly a major role in prices going down and down.
Lot of tech companies are paying off in thousands despite their earnings being very good and stocks at ath.
Inflation fixes many purchase mistakes.
Also, every month that passes is another month with slightly fewer 3% mortgages and slightly more 7% mortgages.
Eventually the “I can’t sell because my cheap mortgage is too valuable” group will only be a trivial factor in the real estate market.
Somewhat off topic …
Cook was canned this evening for falsifying loan docs. Trump is gaining control of the Fed Board.
The long end of the Bond market is sniffing inflation and nudging higher. Trump has time for two cuts this year which could easily send the TNX yield to 5ish by EOY. That could put home rates well up in the 7’s….That should shake up the real estate market.
Should be an interesting week.
There are 7 members on the Federal Reserve Board of Governors including Chairman Jerome Powell. All interest rate policy decisions are made by the FOMC (Federal Open Market Committee) which is comprised of all 7 members of the Federal Reserve Board of Governors plus 5 of the 12 Federal Reserve Regional Banks Presidents in the US. Replacing a single BOG member will not change the vote on the FOMC in September.
(Bloomberg) — President Donald Trump’s campaign to oust Federal Reserve Governor Lisa Cook, if successful, would give him the opportunity to exert more influence over the US central bank by securing a majority on its seven-member board of governors.
Yes, he will need another 3 votes. But so far Trump is finding ways to get what he wants. He ousted Cook. I wonder how the other 5 voting members are feeling tonight? I did not vote Trump, but I can honestly say he’s not the floundering newbie he was 8 years ago. He has nothing to lose and he is going all in to get his way. Today, South Korea joined the ever longer list of countries that rolled over to Trump, no matter what bluster they came up with prior to meeting face to fave at 1600. 100 Boeing airplanes is a big win for Washington State. Boeing’s been on the ropes.
56 minutes ago · SEOUL, South Korea (AP) — Korean Air has announced a $50 billion deal to buy more than 100 Boeing aircraft and several spare engines and obtain engine maintenance for 20…
The 10-year yield has made up the entire Powell-speech drop this evening. It’s back to 4.31%, from 4.24% after Powell’s speech.
“Somewhat off topic”
Not really… because mortgage rates are going in the same direction.
Yippee… Keep it up, 10 yrs yield going up unlike the housing market is where I hope will continue and this is just the beginning.
After all, gotta have an alternative soon when T Bill will eventually inch closer to lower and lower… Either that or I might just buy a share of BRK-A and call it a day if neither shirt or long term moving closer to TINA
We just got assigned our first foreclosure appraisal here in the swamp in over 4 years. These are hard to do. You have trouble getting into the property and they are usually in terrible condition. I believe this is just the beginning of a repeat of the 2008/2009 RE meltdown.
He cannot fire her. Not within his remit.
He did. The letter is out there.
I’m sure there is something in her work contract that alludes to fraud!
There will be a huge court case…more uncertainty.
awww..how cute…are we still pretending to live in a world where there’s a remit to his power and executive orders? like a kid saying “Hey you can’t do that!”
We have seen all the not-within-his-remit action so far; how many got absolutely shut down and reversed without further pursue? Best we can hope for is going to the Supreme Court; even then, it’s 50/50, and if it’s not favorable to his decree, can also ignore the court’s order…
The only thing that will actually change course is unintended consequences, if his action end up blowing up the long term yield opposite to what he wants, that’s the only hope you’ll see any pivot. Time will tell..
Maybe we are there already then…
Now, mortgage interest rates and 10-year and 30-year mortgage rates are set to soar as any and all respect for the Federal Reserve’s independence has been shaken to the core and thrown into utter turmoil.
“any and all respect for the Federal Reserve’s independence has been shaken to the core and thrown into utter turmoil”
Compared to Bernanke?
Yes, that is sarcasm
They need to fire the 200 PHds (stands for Piled High & Deep) that work on the staff of the Fed across the country. They have led the country into ruin. Bring back Musk for a special assignment or better yet let “Big Balls” do it.
Some clown has a home for sale in Aspen Colorado for $300 million. Are you frigging kidding me? Not long ago, you could buy a nice corporation for that amount of money. It seems that the dollar is a dead man walking.
“I got a little place in Aspen.” ~Smug white people
Going to be hilarious when existing-home sellers realize their homes aren’t even worth half of what they think they are worth, and they’re forced to sell (recession, divorce, death etc.)
Until that happens (and that may take a while), the home builders are going to get to eat their lunch in terms of market demand, and make a ton of money off the stupidity of existing-home sellers. Why, exactly, should anyone wanting a home go with an existing home when they could buy a new home for less?
jack – “Why, exactly, should anyone wanting a home go with an existing home when they could buy a new home for less?”
A couple of comments:
1) New build quality is (generally) poor. I’m being generous here. This happened in Housing Bubble 1.0 as well. I’ve seen many recent news reports as testament to this, especially in the south, where most of the construction is going on.
Many construction workers were/are illegal aliens with limited home construction skills or pride of workmanship. The previous administration looked the other way because that was their policy, i.e. open borders and replacement theory.
Many of the builders – like Congress today – are more interested in self-enrichment than building quality houses; builders have stock buybacks and Congress just buys stocks on insider information.
2) The fact that new house price is less than used/existing/resale price says that the market distortions are still massive and continuing. This price inversion also happened during Housing Bubble 1.0. Example: Only during the 2020 pandemic were used car prices more than new car prices, also due to massive distortions (supply chains).
In a normal market, less government interventions – aka a semi-free market – used car (and house) prices would always be less than new. Not rocket science here.
Finally, and accepting that we’re in Housing Bubble 2.0, as part of The Everything Bubble, aka, The Central Bank Bubble, then – based on continued price declines – it makes sense to wait a few years to buy a house. In my view, AI is just another bubble and stonks are next. Asset bubbles always burst. The bigger the boom, the bigger the bust.
Still licking my wounds from 2012 – Misery loves company – Schadenfreude!
I really shouldn’t feel like this: it’s not nice but I just can’t help it.
What it shows was homebuilding never recovered from the Great Crash, and slow building has allowed them to pull back on pricing and still move product while slowing their pipelines. In short, they still are running off those lessons from 15 years ago, when stupid high leverage killed a lot of competition. Vultures made a lot of money off that leverage when they bought entitled and prepped acreage that had no immediate demand. And the survivors kept those lessons as the next boom began. And now that it has ended, they will be standing around waiting for the next boom.
Meanwhile, Trump thinks the Fed can ultimately control interest rates, not really understanding how the bond market is really in control. But just another day in paradise. And interest rates for mortgages could still fall, if the compression between the long T bonds and mortgage rates falls.
All I know is that the foundations of the financial and monetary systems are under stress, and something will break in a bad way as a result of all this.
Someday this war’s gonna end…
Here’s what Lennar is offering in south Texas (hundreds of new homes available):
🎉 SPECIAL BUYER INCENTIVES — $12,000 OFF the price of a home OR toward additional closing costs! 🎉
✨ 3.99% FHA (fixed) + Up to $6,000 in Closing Costs
✨ Fridge, Washer, & Dryer INCLUDED!
📍 Magnolia & Montgomery — North Houston
We have brand-new Lennar homes in the Magnolia and Montgomery areas, priced from the low $220s up to the $500s — with FHA payments starting in the $1,620s per month!
🔹 From the Low $200s
• Magnolia Ridge — from the $220s | FHA from the $1,670s/mo
• Magnolia Springs — from the $230s to $240s | FHA from the $1,690s/mo
• Moore Landing — from the $230s to $330s | FHA from the $1,620s/mo
• Chapel Run (Montgomery) — from the $230s to $260s | FHA from the $1,690s/mo
✨ For Higher-End Buyers
• Colton (Todd Mission) — from the $370s to $400s
• Kresson (Montgomery) — from the $470s to $500s