The housing affordability crisis is forcing homebuilders to do something they’ve almost never done: slash prices on new homes more aggressively than homeowners are for their homes on the market. This is a first for the housing market in recent history, according to a Realtor.com report released Thursday.
“The current housing market is entrenched in an affordability crisis, leaving many average American families feeling excluded from the traditional promise of upward mobility and homeownership,” said Stuart Miller, CEO of Fortune 500 homebuilder Lennar, during a December earnings call. Lennar’s average sales price dropped 10% year over year to $386,000 in Q4 2025, according to its earnings report.
During the fourth quarter of 2025, nearly 20% of new homes faced a price cut, the Realtor.com report shows, and existing home price reductions trail at about 18%. This shift suggests we’re entering a buyer’s market, Realtor.com says, as home prices drop.
“New construction has been one of the steadiest parts of the housing market over the past few years, but builders are clearly responding to today’s affordability pressures and higher levels of existing-home inventory,” Realtor.com chief economist Danielle Hale said in a statement.
Affordability will remain strained despite this activity. Mortgage rates are still floating around 6%, much higher than the sub-3% rates homebuyers enjoyed during the pandemic. Considering the median U.S. home price of about $400,000, hopeful homebuyers would have to shell out $80,000 for a down payment. And most Americans don’t have an emergency account of even $1,000 saved up, meaning a down payment would be totally out of the question.
But for those who are financially prepared to buy a home, discounts on new construction may be welcome news.
“What we’re seeing is a market where single-family new construction is filling an affordability gap that resale homes increasingly can’t,” Realtor.com senior economist Joel Berner said in a statement.
Past incentives to today’s discounts
Fall 2023 marked the start of a housing market deep freeze, with existing-home sales at Great Depression lows amid mortgage rates that peaked at 8%. At the time, homebuilders leaned on incentives like rate buydowns, closing-cost credits, and free upgrades.
At the time, Devyn Bachman, senior vice president of research with John Burns Research and Consulting, said these incentives were the “number one” driver for rising new-home sales figures.
“‘Incentive’ is just a big fancy word for discount, and what we’re seeing on that front is that it’s what’s creating a competitive advantage for the new-home market,” she told Fortune in 2023. The mortgage rate buydown, the industry term for discounted mortgage rates, is the most “desired and most effective” incentive offered in the new-home market today, she added.
Plus, independent sellers on existing homes couldn’t match those types of incentives typically offered by large builders like Lennar and Toll Brothers, Erin Sykes, chief economist at residential real estate brokerage firm Nest Seekers International, told Fortune at the time.
But now, new-home builders are forced to offer straight-up discounts to stay competitive and entice homebuyers.
“Builders are cognizant of the affordability issues facing people all over the country, and they’re responding,” Berner wrote in an August National Association of Realtors report.
Where the cuts are showing up
While discounts are becoming relatively common (one in five new homes was discounted in Q4 2025), they’re not evenly spread across the country.
Price reductions are generally concentrated in the South and West, according to Realtor.com, where much of the nation’s new construction has been clustered in recent years. The states that had an overall share of price-reduced, new-home listings exceeding the national average are relatively nationwide, though: They were Nevada (nearly 25%), Indiana (23.3%), South Carolina (21.6%), Minnesota (21.6%), North Carolina (21.3%), New Jersey (nearly 20%), and Texas (19%).
Meanwhile, “new builds in the Northeast and Midwest are much more of a luxury product and much harder to come by,” so they aren’t discounted with the same level of frequency, according to Realtor.com.
An upside-down condo market
An exception to the trend in new-construction homes facing price drops is with condos and townhomes. During Q4 2025, the median listing price for newly built condos and townhomes was actually higher than for new-build single-family homes.
Nearly 10% of all new condos for sale in the U.S. are in New York City or Miami, where median listing prices top $1 million. Meanwhile, new single-family construction is concentrated in more affordable markets like Houston, Dallas, San Antonio, Atlanta, and Phoenix, where prices are closer to the national median.
“More new condos may be targeting luxury buyers, while many new single-family homes are designed for the entry-level buyer,” the Realtor.com report explained. “It could also be the case that existing single-family homes hold their value better than attached homes.”
