Look, according to HousingWire, we're seeing new home sales tick up month over month, but they're still trailing where we were a year ago. The median price on a new home came in at just under $394,000 in August, which is down about 6 percent from the year before. What's telling here is how hard builders are having to work to make these deals happen.
The story here is really about builder strategy shifting in real time. According to the reporting, builders are using more aggressive tactics now, including mortgage rate buydowns and price cuts across the board. About 80 to 90 percent of new home sales are coming with some kind of rate buydown to help buyers qualify or afford the monthly payment. The inventory situation isn't helping either. There's about 8.5 months of supply sitting out there, with over 100,000 homes already built and waiting for buyers, so builders have real motivation to move these homes even if it costs them more per sale.
What's interesting is the shift in what's selling. Homes priced under $300,000 made up about 22 percent of sales and that share is growing. Meanwhile, homes over $500,000 are selling less frequently. The middle market, homes between $300,000 and $500,000, is where about half of all sales are happening. This tells us builders are responding to where actual buyer demand exists.
The affordability crunch is real and deep according to the reporting. About half of the people visiting builder communities can't even qualify for a mortgage in the first place. Down payments are at their lowest in five years, and the actual cash you'd need at closing to buy a median-priced home while keeping your housing costs reasonable is four times what it was in 2024. Multiple builder executives mentioned that geopolitical concerns, inflation, high gas prices, and job security worries from AI are all keeping people on the sidelines even when they really want to own a home.
What I am seeing locally here in the Bay Area and East Bay is that this dynamic is hitting us differently than other regions. Our median prices are already so high that affordability constraints feel even more severe for first-time buyers and families trying to move up. The builder playbook of cutting prices and buying down rates is happening here too, but there's only so much margin builders have to work with when you're starting from a higher price point. I'm watching whether this inventory pressure forces more meaningful price reductions in our market or if builders will hold firm on pricing and just accept longer sales cycles and fewer transactions.
