Scarcity buoyed March new home sales; builder pressures mount

New home sales at the onset of the spring selling season were higher than a year ago, but homebuilders continued to ramp up incentives and price discounts to maintain sales activity.

As a result, new home prices fell to their lowest point in nearly five years during March. 

There were countless headlines over the past several weeks about how economic volatility and uncertainty upended the spring selling season, after hints of a mortgage-rate tailwind had emerged at the beginning of the year. 

Those headlines matched reality. Mortgage rates and gas prices are higher, more prospective buyers are hesitant and homebuilders need to leverage incentives – and accept further margin pressure – to capture sales. 

However, public homebuilder earnings calls and conversations with private builders reveal a more nuanced picture. While many builders report a challenging spring selling season, others say that sales and demand held up well or even improved in March compared with their measures of demand a year ago. 

While entry-level buyers continue to struggle with affordability, higher-income and established buyers have proven far more resilient to economic pressures.

New home sales increased in March, but price pressures mount

According to U.S. Census Bureau data released on Tuesday, new home sales increased 3.3% year over year in March to a seasonally-adjusted annual rate of 682,000. However, the median sales price of new homes in March fell 6.2% year over year and declined 5.3% from February to March. 

“Combined new and existing home inventory has edged higher in recent months, with the total months’ supply reaching 4.8 months,” wrote Danushka Nanayakkara-Skillington, Assistant VP for Forecasting and Analysis at the National Association of Home Builders. “Meanwhile, inventory conditions in the existing home market have retreated after showing gradual improvement in prior months. Moderating prices across both markets have helped support buyer demand amid ongoing affordability concerns.”

The median new home price in March was $387,400, the lowest point for that benchmark recorded since July 2021 and significantly lower than the median existing home price of $408,800. While the existing home sales market fell to its slowest pace since 2009 in March, homebuilders used incentives and discounts to keep sales activity positive. 

“Demand remains highly sensitive to affordability and macro-uncertainty. Builder sentiment has softened in recent months amid elevated interest rates, declining consumer confidence, and rising geopolitical and energy-related risks,” First American Deputy Chief Economist Odeta Kushi said in a provided statement.

What private builders are saying

HousingWire’s The Builder’s Daily spoke with several private homebuilders about what they experienced during the early days of the spring selling season. 

Salim Chraibi, CEO of Bluenest Development, an entry-level builder in Miami-Dade County, said that demand is steady. However, their first-time buyers are highly sensitive to mortgage rate volatility and inflationary pressures, particularly because Miami is one of the most unaffordable markets in the country.

As a result, incentives, now more than ever, are a key lever for driving sales. However, matching the incentives of competing public builders isn’t possible, so Bluenest has had to get creative. According to Chraibi, Bluenest’s starter homes generally sell in the $400s and $500s, and incentives average about $30,000 a home. 

Bluenest Development now partners with Miami-Dade County to offer a program where buyers can purchase a home with just 1% down. The county provides support through a 30-year second mortgage at 2% fixed and a third mortgage of $35,000 at 0% interest over 30 years.

On a $450,000 home, Bluenest will buy down the first mortgage rate to around 4.99% for roughly $15,000 to $20,000, while also contributing to closing costs alongside lender incentives.

In Miami-Dade County, mortgage assistance programs like this, paired with incentives, are the only way to sell starter homes right now, according to Chraibi. When mortgage rates increase, it becomes that much harder – and expensive – to get buyers across the finish line. 

“In Miami, the demand is there, right? It’s just finding a way for the buyer to be able to qualify and make a monthly payment,” he explained.

Misha Ezratti, President of Florida-based GL Homes, said that home sales have eclipsed this time last year during the spring selling season. In some communities on Florida’s east coast, the company experienced record sales. 

GL Homes is primarily focused on the age-restricted, 55+ segment, which continues to perform well despite economic volatility. This is because those buyers tend to be well-established with home equity that they built up over decades, and are apt to move ahead with a “dream home” purchase, less ruffled by periods of volatility. 

“Market dynamics continue to vary across regions and buyer segments. Some buyers may be holding back, but 55+ buyers are less rate-sensitive and are increasingly buying into a lifestyle, keeping them active in our Florida markets and still driving demand,” Ezratti said. 

Jennifer Cowan, Managing Director of Crown Community Development, a developer of master-planned communities in eight states from coast to coast, said that sales in their communities in March were roughly steady compared to the year prior. However, demand is slower overall.

“We’re not back up to those peak levels. It’s really due to that macroeconomic environment. It just continues to be the biggest driver of buyer uncertainty overall, and the conflict in Iran only adds to that pressure,” Cowan said. 

Crown Community Development handles the approval process from start to finish and then delivers and sells finished lots to homebuilders that build housing for various buyer segments. Some communities are outperforming others, and even within the same community, select product types are seeing stronger demand than others. 

For example, there’s been really strong buyer activity in one of their communities in Hampshire, Illinois, a suburb of Chicago, largely due to its relative affordability. In that community, single-family detached homes start for as low as $350,000. 

Conversely, one of their communities in the Indianapolis market has homes starting at $500,000+. They are seeing noticeably softer demand from entry-level buyers in that price range. In the same neighborhood, higher-priced homes priced at $700,000 and above, which target more affluent move-up buyers, have seen stronger activity this spring selling season. 

Adam Kates, Northern California division president at Thomas James Homes, said this March was very strong for his division, with sales roughly doubling from March 2025. In April, sales were about equal to those seen in the same month last year. 

Thomas James Homes is a luxury infill single-lot builder, and in the Northern California division, their homes range from $3 million to $9 million. 

While a select few buyers delayed their home purchases due to recent economic volatility, Kates said that Thomas James Homes’ wealthy customers are much less affected by it and generally see real estate as a strong investment. 

“I think at the higher price points, there was some flight to safety, with real estate being more stable, perhaps than the stock market. I also think the market is somewhat conditioned over the last year and a half to see the shocks as temporary, and residential real estate has performed well and been stable in our marketplace,” Kates said. 

Public homebuilders also feel pressure

As the latest public homebuilder earnings season wraps up, one trend is clear. While homebuilders are optimistic that the bottom has arrived or is near, gross profit margins and home prices are down across the board. And to keep sales trending positive, homebuilders had to generously increase incentives. 

Green Brick Partners, for example, reported that sales in March were about steady year over year. However, incentives during the first quarter, which also included January and February, increased to 10.1% of the total sales price, up from 6.8% a year ago. Executives conceded that incentives and price discounts were necessary to drive sales. 

Additionally, Century Communities executives said incentives increased each month sequentially during the first quarter and peaked in March. 

Meanwhile, M/I Homes reported that new contracts were up 11% in January and 7% in February compared to 2025. That momentum stalled in March, which saw a 6% yearly decline in new contracts, a trend that executives blamed on rising mortgage rates and gas prices.

Key takeaways

The homebuilding market isn’t a monolith. Some buyer segments and markets continue to perform better than others.

However, the new-home market overall is quite challenging. These challenges aren’t new, but the economic disruptions resulting from the war in Iran added another layer of difficulty and uncertainty to the mix. New home prices fell substantially between February and March, indicating that builders increased discounts and incentives to drive sales. 

This trend is a warning to private builders, who generally can’t match the generous incentives and mortgage-rate buydowns of their public counterparts. A session at the International Builders’ Show in February offered advice to private builders competing with large publics. 

Private builders can weather the storm by carving a niche and specializing in what competitors aren’t building, developing strong relationships with vendors and improving operational efficiency in small but meaningful ways.

It’s not clear if the homebuilding market has bottomed out, how much longer homebuilders will feel the squeeze or when consumer confidence will meaningfully improve. For now, builders, particularly those that sell to the entry-level and affordable buyer segments, may need to keep sacrificing on price and margins to drive sales.