Morgan Hill's Builders Are Now the Resale Market's Competition

In Morgan Hill, the newest townhomes on the market can start below what used resale townhomes are selling for. KB Home lists Haven at Crosswinds, at 1260 Pueblo Ln., from $789,000. In September 2026, the median condo and townhome resale in Morgan Hill closed at $895,000, according to the Santa Clara County Association of REALTORS® September 2026 report.

That gap matters if you're comparing South County cities. It means a Morgan Hill resale seller now competes with production builders as well as the house down the street. Builders price differently, finance differently and have more homes on the way. The reason traces back to a growth cap that has been suspended since state law took effect in 2020.

The growth cap stopped working

For years, Morgan Hill rationed new housing through its Residential Development Control System, or RDCS. The last voter-approved extension, Measure S in 2016, set a population ceiling of 58,200 and allowed a maximum of 215 allotments a year, awarded through a competition.

The city's 2023–2031 Housing Element explains what happened next. The state's Housing Crisis Act of 2019, known as SB 330, took effect January 1, 2020, and "preempts and precludes the enforcement of RDCS" while it is in effect. According to that Housing Element, adopted in January 2023, SB 8 extended the prohibition to January 1, 2030.

The permit counts in the city's Annual Progress Report from March 2026 show what happened once the cap stopped applying:

Market-rate permits rose every year, and in 2025 the city permitted 329 homes in total. That's well above the 215 annual allotments Measure S allowed.

The new homes landed at the top of the market

The state's target for Morgan Hill, its Regional Housing Needs Allocation, is 1,037 homes by 2031, split across income levels. By the end of 2025, the city had permitted 1,144. That's above the full eight-year target with about five years to go.

Most of the overshoot is market-rate housing. The above-moderate target was 450 homes, and the city has permitted 571. The shortfall is elsewhere. The progress report still lists 66 moderate-income homes and 50 very-low-income homes to go.

For a buyer, that means most of Morgan Hill's new supply is priced to compete with resale homes, and production builders are the ones selling it.

What builder starting prices do to resale

Builders publish starting prices, and those prices overlap with the September 2026 resale medians.

Builder prices are as listed on the builders' own pages in early November 2026 and can change at any time. KB Home's January 2026 grand-opening announcement put prices in the Crosswinds master plan from the mid-$800,000s. The Haven page now starts at $789,000.

Comparing price per square foot sharpens the single-family picture. In September 2026, Morgan Hill's single-family resales sold at a median of $618 a square foot. At Preserve's $1,189,990 starting price, the cost works out to about $564 to $590 a square foot, depending on which plan in the 2,018-to-2,111-square-foot range that price covers. A median and a starting price measure different things. Resale homes vary in age, lot size and location, while a tract plan is uniform. Even so, a resale seller's comparable sales now include brand-new homes in the same city.

The townhome comparison needs one caution. The $895,000 condo and townhome median came from only 14 closed sales in September 2026, so a few sales could move it a lot.

Builders can offer financing a resale seller usually can't

Builders can arrange a lower mortgage rate across an entire community. Most individual resale sellers can't.

As of early November 2026, City Ventures advertises a 5.99% fixed rate on select homes in select communities, for contracts that close by December 23, 2026. Its example uses an $815,000 purchase price, 20% down and a 740 minimum credit score, for a calculated monthly payment of $3,905 before taxes, insurance and HOA dues. The offer covers select communities, so ask the sales manager at The Gates whether it applies there. KB Home's own special-rate terms required a purchase agreement by October 31, 2026, so that offer has ended.

While an offer like this is running, a resale townhome listed in Morgan Hill in mid-November may be competing with a lower payment at a nearby new community, not just a lower price.

The September 2026 resale numbers are consistent with that pressure. Single-family inventory reached 82 active listings, up from 63 in September 2025. The median price rose to $1,560,000 from $1,500,000 over the same period. Condos and townhomes averaged 58 days on market in September 2026, compared with 35 for single-family homes. Both property types still sold at 99% to 100% of list price. Sellers who priced realistically still got close to their asking price. Townhomes just took longer to sell.

More new homes are planned off Cochrane Road

More new supply is planned. In October 2026, San José Spotlight reported that the Planning Commission unanimously recommended a 105-home project east of the U.S. Highway 101 Cochrane Road exit. The project still needs City Council approval. The developer is High Street Residential, a Trammell Crow Company subsidiary. It filed in October 2023, a month before the city's housing plan was certified, which let it use the state's builder's remedy.

According to the Spotlight report, the plans call for market-rate, two-story detached homes with two-car garages, ranging from 2,147 to 2,615 square feet. A settlement split the roughly 28.5-acre site three ways:

• a 15.8-acre parcel for the homes
• a 7.8-acre parcel for a shopping center anchored by a Sprouts grocery store, slated to open in late 2027
• a 4.7-acre parcel to be transferred to the city for affordable housing

The developer also agreed to pay $500,000 to the city's housing fund and an in-lieu fee of about $5.85 million.

Edith Ramirez, assistant city manager for development services, told San José Spotlight that the city gained "a project that is going to advance the city and is within the character of the city."

If approved, those homes would add new detached supply in the same size range as Crosswinds' Retreat plans. Builders would then be setting new prices in that size range as well.

How to compare a Morgan Hill resale listing with new construction

1. Price the new-build alternative first. Before you write an offer on a resale townhome, get the current base price, homesite premium and solar cost at the nearest new community. Haven's posted price adds the cost of solar.
2. Compare monthly payments as well as prices. A builder rate offer can change the comparison even when the list prices look similar. Check the closing deadline that comes with it.
3. Check how long the listing has been on the market. In September 2026, Morgan Hill condos and townhomes averaged 58 days on market. A resale listing well past that mark may leave room to negotiate.
4. Look at what new construction doesn't offer. Builders sell new homes in new subdivisions. Lot sizes, established trees and locations in older parts of town are where resale homes differ most from tract homes.

Any mention of rates, fees or loan terms here is general information, not legal, tax or financial advice. Confirm your own situation with a lender or other qualified professional before acting on it.

Quick answers

Is Morgan Hill's growth cap coming back? The city's 2023 Housing Element says state law suspends RDCS enforcement while the Housing Crisis Act is in effect, and puts that prohibition's end date at January 1, 2030.

Do resale homes still sell near asking price? Yes. In September 2026, Morgan Hill single-family homes sold at 99% of list price and condos and townhomes at 100%.

Is the Cochrane Road project approved? As of the October 2026 San José Spotlight report, the Planning Commission had recommended it and City Council approval was still pending.

If you're selling a Morgan Hill home, your buyers will price it against the new communities nearby, and your list price should account for that. Kimberly Macias can put together a valuation that compares your home with nearby resales and with current builder pricing and offers. Get your free home valuation to see how it stacks up.