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In the Race to Sell, Builders Are Offering Major Price Reductions

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In the Race to Sell, Builders Are Offering Major Price Reductions

Home builders are offering rate buydowns to prospective buyers in order to bolster demand and sell homes faster 

December 14, 2022
Small toy house under construction with builder figurines and a stack of cash
Image: Stock.adobe.com

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. 

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