Despite the sharp increase in mortgage rates since the start of the year, new home project sales rates throughout California are at the highest levels in over 15 years.

Through the first 6 weeks of the year, sales rates in every major market are exceeding 4.0 sales per project per month, and San Diego and the Inland Empire are at 5.5 sales per project per month. The historical average in most markets at this time of year is typically in the 2.0 to 2.5 sales per month range.

Despite the rise in rates, most sales agents are telling us that their buyers are still pretty well qualified to buy. Between strong sales and qualified buyers, homebuilders still have pricing power.

Strong sales are a result of three key factors:

Lack of new and resale supply.

All markets have a historically low number of active new home communities and record low resale supply. Contact us for further information about how under-suppled each market is.

Rising mortgage rates.

The rise in mortgage rates have actually pushed “fence sitters” into the market, worried that rates could go up even higher in the coming year.

COVID has increased the demand for new housing.

More people are working from home, home-schooling, or housing extended family. Many households are reassessing their current living situation. In addition, the work-from-home trend has increased demand from buyers coming out of more urban areas. Households who otherwise were not in the market for a new home are now deciding to move, increasing the demand for new construction homes.