New home sales slowed nationally in October as the market entered its typical seasonal cooldown and affordability pressures continued to limit buyer activity. Builders sold new homes at an annualized pace of just over 700,000 units during the month, down from late-summer levels. Even with that monthly slowdown, sales remained approximately 13% higher than a year earlier, underscoring how new construction continues to outperform the slower recovery in the resale market.

 

Real home prices increased just 1.8% on average in 2025, a pace that fell below inflation and helped prevent price growth from becoming a larger affordability obstacle. Looking ahead, market forecasts point to a potential rebound in home sales in 2026, with volumes expected to rise by roughly 7% as mortgage rates move closer to 6% and overall conditions normalize.

Why New Construction Is Carrying the Market

Despite modest price growth, affordability remains a central challenge. Rising non-mortgage costs have placed growing pressure on household budgets, with expenses such as insurance, utilities, and property taxes increasing by roughly 30% in 2025. Insurance premiums alone are expected to climb another 8% in 2026, once again outpacing inflation and limiting any relief created by slower home price appreciation.

 

In this environment, new construction has continued to play a critical role in supplying available inventory. Limited resale supply across much of the country has kept builders focused on incentives rather than higher prices. Mortgage rate buydowns and closing cost assistance have helped support absorption and sustain sales activity, even as many buyers remain cautious.

Southern California Follows National Trend

Southern California followed a similar trajectory in October. Across the six-county region, Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura, buyers completed approximately 14,600 home sales during the month, reflecting a measured and seasonally typical pace.

 

That volume aligns with historical norms for Southern California at this point in the year. The California Association of Realtors reported that regional home sales rose about 5.6% year-over-year in October, marking a modest improvement from last year despite persistent affordability constraints. Price growth in much of the state has been muted but relatively stable, with statewide median prices only slightly lower or flat compared to a year ago even as some Southern California counties have seen small gains; overall, pricing hasn’t collapsed but hasn’t surged either. Looking ahead, C.A.R.’s 2026 forecast anticipates modest price growth, with the California median home price projected to rise about 3.6% next year, suggesting a gradual upward trend in values alongside improving sales activity. 

 

New construction continued to support overall activity, particularly as resale listings remained scarce. Buyers showed stronger interest in more affordable inland markets, while higher-priced coastal submarkets experienced longer marketing times. Entry-level and attached homes (i.e. Townhomes) attracted the most attention as buyers prioritized manageable monthly payments over square footage.

 

Looking Ahead

As Southern California enters the heart of the winter season, new home sales continue to hold at a steady but subdued pace. Affordability constraints are keeping builder strategies focused on incentives and targeted product offerings as buyers wait for clearer improvement in borrowing conditions. Lower mortgage rates could still bring many sidelined shoppers back into the market, particularly first-time buyers, according to a recent BPG Inspections survey. Nearly two-thirds of first-time buyers said they would actively begin house hunting if mortgage rates fall to what they consider an affordable level. Respondents identified 4.86% as the highest manageable rate for a 30-year fixed mortgage.

 

First-time buyer preferences point to a strong desire for flexibility and control. About one-third (33%) said they prefer new construction, while 29% expressed interest in fixer-uppers. Another 16% favored flipped homes, and 22% remained open to other housing options.

 

Affordability continues to stand as the primary barrier to homeownership. More than eight in ten first-time buyers (83%) report that high housing costs have prevented them from purchasing a home, while fewer than one in ten say they prefer renting, underscoring that demand for ownership remains strong, but is constrained by pricing rather than preference.