Topline
Builders have become more eager to offer prospective home buyers incentives— including more affordable rate buy-downs, reduced closing costs and free amenities—as mortgage rates soared to a 22-year high last quarter and more homes emerged on the market.
Builders are adding increasingly more incentives for new home buyers.
Key Facts
Ryan Marshall, president and CEO of home construction company PulteGroup Inc., said during a second-quarter earnings call that a majority of incentives offered are longer-term mortgage rate locks or rate buy-downs–or when the buyer pays more upfront for a lower interest rate–noting “many of today’s home buyers can still afford the price of a new home,” but some need help affording mortgage rates.
Kimberly Mackey, founder of New Homes Solutions, says sales representatives are eager to provide buyers with “as much as possible” while giving “something like a refrigerator … or blinds, or something along those lines, to incentivize a buyer” to move quickly on purchasing a home.
Builders are promoting possible incentives with home buyers upfront rather than through the offer process, Rose Quint, an economist with the National Association of Home Builders, told Forbes, as 53% said they offer incentives ranging from reduced closing costs to buy-downs.
Faith Floyd, an agent for real estate brokerage Redfin, said she’d “seen at least one offer a $10,000 check for closing costs, a $3,000 gift card and a free fridge.”
Some builders are offering to buy down a buyer’s mortgage rate by 1.5 percentage points, Floyd said, while Marshall added incentives are “now expanding to include discounts on options and lot premiums.”
Big Number
603,000. That’s the number of single-family homes sold in September, according to the U.S. Census Bureau. This is a near-11% drop from August and a 17.6% decline from the previous year.
Crucial Quote
Finding the right home can be difficult despite the growing inventory of available homes, Marshall said, though builders are continuing to grow on what can be sold to consumers. “In terms of choices and the opportunities that buyers have, I think it’s still hard to find homes that are in the right place at the right price with the timing that matches up to what buyers want,” he said.
Key Background
The number of single-family homes for sale increased by a record 29% in the third quarter, despite new-home sales falling to a six-year low. NAHB Chairman Jerry Konter, who works as a builder and developer in Savannah, Georgia, suggests “buyer traffic is weak in many markets” as mortgage rates recently rose to a 22-year high, with new home purchases remaining just out of financial reach for first-time buyers.
Further Reading
Source: https://www.forbes.com/sites/tylerroush/2022/11/08/housing-market-recession-spurs-home-buying-incentives-heres-what-builders-are-offering/