New home prices continue their downward spiral as builders fight to clear record inventory levels not seen since 2009. The median contract price dropped 6.8 percent year-over-year to $400,500 in January, with three-month averages falling 7.7 percent from late 2022 peaks. However, these figures understate actual price declines because they exclude substantial builder incentives and mortgage-rate buydowns. When incentives are included, effective prices have fallen far more dramatically. Major homebuilder Lennar cut average selling prices by 24 percent from their 2022 peak to $374,000, matching 2017 levels, while slashing gross margins nearly in half to 15.2 percent. Operating earnings plunged 54 percent year-over-year as builders aggressively compete for market share in a frozen housing market where lower mortgage rates may never materialize.
