As rising mortgage rates put a dent in homebuyer demand across the U.S., home builders are offering rate buydowns and new purchasing incentives to offload for-sale homes. Over 75% of builders nationwide are using mortgage buydowns to encourage buyers to move forward with home purchases, and almost one-third of those surveyed by John Burns Real Estate Consulting said they are buying down the full 30-year mortgage for their buyers to lower mortgage rates by up to 2%, Insider reports.
Just a 2% rate reduction can amount to thousands of dollars in savings, meaning that in pricey cities like Phoenix, where the median home costs $450,000, builders are fronting between $22,500 and $27,000 of the total sales cost to boost demand.
"We've been having a lot of conversations with homebuilders about what incentives are particularly effective at attracting new homebuyers, and we're finding that the rate buydown aspect really matters in terms of attracting new buyers in a slow market," Jody Kahn, senior vice president of research at John Burns told Insider.
Related Stories
Builders
Home Builder Incentives and Price Reductions Are Finally Paying Off
Home building company KB Home reported a drop in cancellations at the start of 2023 after a major slowdown in buyer activity during the final quarter of 2022
Builders
Home Builders Remain Optimistic Despite Market Headwinds
Buyers are retreating as mortgage rates rise, but home builders are looking ahead to strong growth in the new-home market in 2023
Human Resources
It's Personal: Pilot Program Promotes Mental Health Awareness in Construction
The National Association of Home Builders partners with mental health advocate Dr. Sally Spencer-Thomas on a strategic plan to promote mental health and suicide prevention