New Housing Update: End of August 2025

US New Home Market: Sales, Prices, Permits and Inventory as of September 30, 2025

As the Chief Economist of The Curiosity Vine, I've closely analyzed the latest housing market data, which offers a clear, if sobering, view of the current landscape. The overarching narrative remains dictated by mortgage rates, which continue to exert significant influence on both supply and demand across the United States.

See our chart book: New Housing 08 2025

Sales and Price Dynamics

The housing market has seen a notable shift in the balance of new versus existing home sales.

• Sales of existing homes have dropped off more than new home sales over the past 18 months.

• One out of every seven homes sold in the U.S. is now a new home. This disparity is logical: existing homeowners are less likely to sell, as many are "locked in" by very low-rate mortgages.

This dynamic has even inverted a historical pricing norm:

• Historically, existing home prices are usually 85% of new home prices.

• In a rare occurrence over the prior 21 years, however, existing home prices have recently exceeded new home prices. This inversion reflects the scarcity of existing homes on the market and the builders' ability to use price to move their inventory.

The 5.00% mortgage rate threshold remains a critical material price point. Since April 2022, rates have been consistently higher, which has resulted in a moderation of home price increases (prices have been virtually flat for three years). For the millennial generation and first-time buyers who initially entered the market when rates were sub-5.00%, this elevated level represents a major affordability barrier.

Construction and Inventory Constraints

Builders continue to exercise caution, a prudent approach rooted in the failures of the subprime crisis. Despite new home sales being up to 850,000 annualized units, the volume being built is nowhere near the 1.2 million units seen in 2007. Our analysis indicates a cumulative undersupply of new homes for the past 10 years.

This undersupply is not solely an economic function; it is heavily influenced by the structural impediments to development:

• Zoning and Land-Use Restrictions: These local government regulations—such as minimum lot sizes, restrictive setbacks, and limitations on density—represent the overarching, long-term constraint on the willingness and ability of builders to increase supply. They drive up land costs and construction timelines, reinforcing the scarcity of buildable units.

  
  

Looking at the new home construction pipeline:

• Permits and Starts generally move in lock-step, but Completions lag by approximately six months.

• The overall number of homes under construction is largely flat.

• A key metric to monitor is the declining share of homes under construction that are for sale, which should eventually slow the increase in completed, unsold homes (the red line in the data).

The Informed Takeaway

The US new home market is in an artificial equilibrium. Demand is tempered by high mortgage rates, while supply is structurally constrained by both cautious builders and restrictive local zoning policies. For the informed consumer, the message is clear: major shifts in sales volume and inventory are strongly correlated with mortgage rate fluctuations around the critical 5.00% level. However, until we see meaningful policy changes to ease land-use restrictions, the decades-long fundamental housing shortage will ensure that affordability remains a persistent challenge, even if rates decline.