Inventory in the South still sky-high, up 60% from March 2019. But homebuilders understand what it takes: lower prices and big incentives.

By Wolf Richter for WOLF STREET.

The median contract price of new single-family homes dropped by 6.2% year-over-year and by 11.2% from two years ago, and by 15% from the peak, to $387,400 in March, the lowest since July 2021 (blue in the chart), according to data from the Census Bureau today. But this median price does not include the costly incentives, such as mortgage-rate buydowns, that builders use to boost their sales.

The three-month average, which irons out some of the month-to-month squiggles, dropped by 3.8% year-over-year and by 6.1% from two years ago, to $403,100, the lowest since September 2021 (red).

The business of homebuilders is to build and sell homes, no matter how tough the market is, and they want to protect or gain market share, and they have adjusted to this market with lower prices and big incentives, and sales have held up, unlike sales of existing homes, which have been in the deepfreeze for four years.

This median price is based on prices written into purchase contracts, which do not include the costs of mortgage-rate buydowns and some other incentives.

With mortgage-rate buydowns and other incentives included, prices of new homes fell far more, according to homebuilders’ financial reports.

Homebuilder Lennar, which has been pushing for big growth in unit-sales volume to gain market share, disclosed in its Q1 financial statements that it cut the average price per home sold in Q1 to $374,000, the lowest since 2017, and by 24% from the peak in Q2 2022, including incentives and mortgage-rate-buydown costs. And its guidance for Q2 included a further drop (blue in the chart below).

Those incentives and lower prices came largely out of Lennar’s gross margin on home sales, which plunged to 15.2% in Q1 2026, from 26.9% in Q1 2022, when FOMO-addled buyers were still eager to pay whatever.

Lennar targets the mass market, not the high end. It’s building new homes for average families. Its homes are mass-market products, designed and built to be more affordable. Lower-priced homes are exactly what this price-ravaged market needs.

Overall sales of new single-family homes ticked up 1.6% year-over-year to 64,000 homes in March, among the highest sales months since 2022. Compared to March 2019, sales were down by only 6%, while sales of existing single-family homes plunged by 22% over the same period.

Regionally, sales rose year-over-year by 7.9% in the South, fell by 13.3% in the West, and were roughly unchanged in the Northeast and Midwest.

Of those total sales, 64% occurred in the South and 25% in the West (89% combined). The remaining 11% of the sales occurred in the Northeast and Midwest combined.

Inventory of completed single-family homes for sale dropped for the third month in a row, from the 17-year high in December, to 119,000 in March. But that inventory of what are mostly move-in ready “spec homes” was still up by 5% year-over-year and by 54% from March 2019. These are still huge inventory levels of completed homes that builders have a lot of capital tied up in, and that they’re very motivated to sell.

Inventory of under-construction single-family homes had reached near peak-Housing-Bust levels in late 2022.  Since then, builders have made some progress in whittling down that pipeline, but at 243,000 in March, levels remain very high, and there was no progress at all over the past four months:

Inventory of single-family homes at all stages of construction, from not started to completed, at 475,000, was roughly unchanged in March for the fourth month in a row, at very high levels, up by 45% from March 2019.

Regionally, 61% of this inventory is in the South and 21% of it is in the West. More in a moment.

Inventory at all stages of construction by region.

In the South, inventory of new single-family homes for sale at all stages of construction in March declined by 4.3% year-over-year to 290,000, but was up by 3.9% from two years ago.

And it’s very high: Compared to March 2019, inventory for sale was up by 60% (a map of the four Census regions is below the article at the top of the comments).

The South accounted for 61% of total US inventory for sale.

In the West, inventory of new single-family homes for sale declined by 11% from a year ago and by 7% from two years ago, to 101,000, but that was till up by 19% from 2019.

The West accounted for 21% of the total US inventory for sale.

In the Midwest, inventory jumped by 10% year-over-year and by 26% from two years ago, to 53,000 new homes, and was up by 40% from March 2019:

In the Northeast, inventory was unchanged year-over-year, but up by 25% from two years ago, at 30,000 new homes. Compared to March 2019, inventory was up 7%.

The Northeast is a small area with big densely populated cities where multifamily construction (condos and apartments) plays a very big role, rather than single-family construction.

In case you missed it: Gap between Single-Family Rents & Multifamily Rents Widens to Record as Multifamily under Pressure

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