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Home Builders Are Boosting Incentives to Sell Homes as Buyers Pull Back

New-Home Sales

Home Builders Are Boosting Incentives to Sell Homes as Buyers Pull Back

Inventory is rising, but home sales are slowing for the first time in two years, prompting some builders to offer incentives to interested buyers


July 27, 2022
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Image: Stock.adobe.com

Sales of newly built homes fell more than 8% from May to June and were down 17% from June 2021, a marked change from a two-year buying frenzy driven by record demand from competing homebuyers. As affordability concerns mount and home sales slow, inventory is on the rise, reaching a 9.3-month supply in June, up from 5.6 months at the end of last year, CNBC reports.

In order to continue selling homes in the midst of a homebuying rut, builders are boosting incentives tied to mortgages and offering discounts and lot premiums. Still, buyers are hesitant to purchase homes as mortgage rates settle into a high 5% range and housing prices reach new highs. Builders seeing pullback from buyers halfway through the year are hoping that as the market cools and homes appreciate at a slower pace, sales will soon pick back up.

“We have to work harder to sell homes. We have to be more nimble,” Pulte CEO Ryan Marshall said on a conference call with investors. “Home price appreciation has slowed, stopped, or, through the use of incentives, is taking a couple of steps back. Through much of the second quarter, incentives were mostly tied to the mortgage, but this is now expanding to include discounts on options and lot premiums.”

The median price of a newly built home sold in June was $402,400, still up 7.4% from a year ago. But the market had been experiencing double-digit price increases. Builders are getting help from lower commodity prices now, especially lumber, and land prices are starting to adjust lower as well.

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