A Morgan Hill townhome seller this fall is competing with builder financing. On October 15, 2026, Freddie Mac's weekly survey put the average 30-year fixed mortgage rate at 7.40%. City Ventures is advertising 5.99% fixed on select homes, and KB Home is advertising a 4.99% adjustable rate.
That financing gap shows up in local prices. New townhomes list for clearly more per square foot than resale ones. Resale townhomes still close at about full asking price. Put the two numbers side by side and they line up: the per-foot premium on a new townhome is roughly what the builder's financing is worth. If you're a buyer here, the question to ask about any townhome is the monthly payment, not the price.
What 5.99% buys when the market sits at 7.40%
City Ventures shows its own math in the fine print of its current offer. Take an $815,000 purchase with 20% down, a $652,000 loan and a 740 minimum credit score. At 5.99% fixed, that comes to $3,905 a month in principal and interest. The payment does not include taxes, insurance, HOA dues or special assessments.
Now run the same loan at the market average. Standard 30-year amortization at 7.40% puts principal and interest near $4,500 a month. The builder's rate is worth about $600 a month to that buyer.
A resale seller can't offer a below-market rate by changing the listing. They can only lower the price. Here's what that comparison looks like, using the same 20% down payment:
| Scenario | Purchase price | Rate | Monthly principal and interest |
|---|---|---|---|
| Builder offer, City Ventures example | $815,000 | 5.99% fixed | $3,905 |
| Same price, market-average rate | $815,000 | 7.40% | about $4,500 |
| Resale priced to match the builder payment | about $705,000 | 7.40% | about $3,905 |
The last row is the useful one. With 20% down and the average rate, a resale home would need to cost about $110,000 less than the builder's home to produce the same monthly payment. Your own rate will depend on your credit, loan type and lender. Freddie Mac's figure is a national average, not a quote.
The per-foot gap is roughly the size of the subsidy
Now compare the advertised prices with what resale townhomes actually sold for.
- The Gates by City Ventures, 18459 Monterey Road. These are three-story townhomes. Plan 1 starts at $849,990 for 1,405 square feet, about $605 per square foot. Plan 2 starts at $947,990 for 1,700 square feet, about $558 per square foot. Plan 3 starts at $1,080,990.
- Haven at Crosswinds by KB Home, 1260 Pueblo Lane. KB describes these as townhome-style condos with three-story plans of about 1,262 to 1,790 square feet. Prices start at $789,000 plus the cost of solar, and a homesite premium may apply. At the smallest plan, that's about $625 per square foot before solar.
- Resale condos and townhomes, September 2026. The Santa Clara County Association of REALTORS reports a Morgan Hill median of $895,000 and a median of $522 per square foot across 14 closed sales. Sellers received 100% of list price.
Start with Plan 1 at The Gates. It sits about $83 per square foot above the September resale median. Across 1,405 square feet, that's roughly $117,000. That figure is close to the $110,000 price cut a resale seller would need to match the builder's payment. The two numbers come from different sources and measure different things, and starting prices are not the same as finished contract prices. Still, they point the same way. Resale townhomes here seem to be priced at about the discount it takes to offset the builder's financing.
The builder side has moved too. In a January 23, 2026 grand-opening release, KB described Haven's prices as starting in the mid-$800,000s. Its community page now shows $789,000. City Ventures opened The Gates on March 28, 2026, and calls it the company's seventh Morgan Hill neighborhood. When two active builders sell the same product type a few miles apart, resale sellers are setting their prices against them.
Where the fine print changes the comparison
A builder rate only counts if you actually qualify for it and keep it. Both offers come with conditions that matter in a side-by-side comparison.
KB Home's 4.99% rate is a 5/1 adjustable-rate mortgage, not a fixed rate. KB's own example uses an FHA loan with 3.5% down. The payment is $2,530 a month for the first 60 months and then $2,960 a month at 6.43% from month 61 on. The terms allow a 1% first adjustment and a 5% lifetime cap. To get the rate, you must sign a purchase agreement by October 31, 2026, finance through KBHS Home Loans, lock the rate within 30 days and live in the home yourself. KB says some communities may be excluded. That deadline is Saturday, October 31, so the offer may have ended or changed by the time you read this.
City Ventures' 5.99% is a 30-year fixed rate, but it applies to "select homes in select City Ventures communities" for contracts that close by December 23, 2026, and lender approval is required. Ask the sales office which homesites at The Gates qualify.
These two offers change how you should compare homes:
- Compare each home's payment over the years you expect to own it, not only in year one. An ARM's payment can rise after the initial period.
- Line up HOA dues, solar costs and homesite premiums for each home. None of them appear in the advertised rate examples.
- Check whether the rate requires the builder's affiliated lender. That limits how much you can shop the loan.
- Get a written rate quote from your own lender on a resale home in the same price range. Comparing against the 7.40% national average is a starting point, not your actual number.
This is general information, not financial or legal advice. Confirm loan terms and your own situation with a licensed lender and, where needed, an attorney or tax professional.
Detached homes are slowing, and builders aren't the reason yet
Detached homes show a different version of the same pressure. Neither active builder is selling detached homes in this comparison, so resale houses have the market largely to themselves. Prices have held while the pace has dropped.
| Morgan Hill single-family | September 2025 | September 2026 |
|---|---|---|
| Closed sales | 35 | 21 |
| Homes for sale at month end | 63 | 82 |
| Median price | $1,500,000 | $1,560,000 |
| Median price per sq. ft. | $600 | $618 |
| Share of list price received | 98% | 99% |
Divide month-end inventory by monthly sales and you get a rough measure of supply. It went from about 1.8 months in September 2025 to about 3.9 months in September 2026. Countywide, September 2026 had 1,224 detached homes for sale against 726 sales, about 1.7 months, and sellers received 103% of list. San Jose ran at roughly 1.7 months, with sellers getting 102% of list.
The month-over-month view suggests the higher median is partly about which homes happened to close. From August to September 2026, the Morgan Hill detached median rose $30,000. Over the same month, median price per square foot fell $16, average days on market rose by 10 and the share of list price received slipped from 101% to 99%. With only 21 sales in a month, a few larger homes closing can lift the median while buyers gain leverage on each individual deal.
The builders are heading toward detached homes next
Detached homes may not stay builder-free. San José Spotlight reported on October 16 that the Morgan Hill Planning Commission had voted unanimously to recommend High Street Residential's plan for 105 single-family homes. The 15.8-acre site sits just east of the U.S. 101 Cochrane Road exit. City Council approval is still pending. The site is next to a planned shopping center anchored by a Sprouts grocery store, which is slated to open in late 2027.
Farther out, the Mariani Ranch proposal in unincorporated Morgan Hill calls for 376 homes: 162 detached single-family homes, 138 clustered detached homes and 76 duet units. It is still in the Draft Environmental Impact Report stage. Neither project has homes for sale. If either is built and sells the way today's townhome builders do, detached resale sellers could end up competing on financing too.
Questions buyers ask about this
Is a new townhome a better deal than a resale one in Morgan Hill right now? It depends on the payment, not the price. With 20% down, a resale townhome needs to cost roughly $110,000 less than the City Ventures example to match its payment at the October 15 average rate of 7.40%. Run that comparison with your own lender's quote.
Do resale townhome sellers in Morgan Hill have to cut prices? September 2026 resale condo and townhome sales closed at 100% of list price. They averaged 58 days on market, compared with 42 countywide. Sellers who price close to the resale per-foot level are getting their asking price. It just takes longer.
Will these builder rates still be available next month? KB's offer requires a signed purchase agreement by October 31, 2026. City Ventures requires closing by December 23, 2026. Both builders say their terms can change without notice.
Karin Freiman can line up a Morgan Hill resale and a new-build townhome on the same payment basis so you can see which one actually costs less over the years you plan to own it. Book a Consultation.
