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Are the Days of Builder Incentives Coming to an End?

New-Home Sales

Are the Days of Builder Incentives Coming to an End?

For the past several months, home builders have offered prospective buyers mortgage rate buydowns to make new-home purchases more affordable, but as the market stabilizes, those incentives may be coming to an end

May 9, 2023
New home construction on stack of bills and coins
Image: Kurhan / stock.adobe.com

After months of rising cancellation rates and falling sales, home builders are getting back on track this spring, and that rebounding demand is largely attributable to mortgage rate buydowns and other sales incentives. In a December poll by John Burns Real Estate Consulting, 75% of nationally surveyed home builders reported buying down homebuyers’ mortgage rates to make home purchases, and subsequent monthly mortgage payments, more affordable. 

While builders aren’t completely halting rate buydowns in a more stable market, several are beginning to rein in generous offers as they build up healthy backlogs of projects for the year ahead, Fortune reports.

“They’re saying in some cases, they’re pulling back a bit on incentives,” [Jody] Kahn said. “In some cases, they’re testing small price increases, say a couple $1,000 on the asking price or list price. And in some cases, [they] are doing both. So they’re taking baby steps because they do not want to see a sudden turn off at the spigot where they’ve gone too far and just completely lost their sales trajectory.” 

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