High mortgage rates, anemic housing supply in some regions and record prices have forced many Americans to sit tight on buying a new home or selling their existing one.
For builders of new homes, that has meant offering more incentives, like cutting interest rates on a mortgage for the first few years, giving buyers more money toward closing costs or reducing the list price of a home.
Sales for new single-family homes in July were down 0.6 percent from June and 8.2 percent from the year before, according to data released on Monday from the U.S. Census Bureau. Roughly two-thirds of builders said they had used incentives in August to draw people into homes, according to a survey by the National Association of Home Builders and Wells Fargo Housing Market Index. Nearly 40 percent of the builders surveyed reported cutting prices, with average reductions of 5 percent, compared with 29 percent of builders who said they cut prices in April.
Stuart A. Miller, a chief executive of Lennar, one of the nation’s largest residential builders, said on a June call with analysts that the company had offered incentives of more than 13 percent of a home’s cost in the second quarter and that it would continue focusing on “lower cost structures.” That’s more than double the normal incentive rate, which Mr. Miller said on a March call should be around 5 or 6 percent.
These efforts have been buying builders time, but incentives and price cuts can go only so far to bring down costs if mortgage rates remain high and affordability continues to be out of reach for buyers.
While companies remain profitable now, the amount they’re pulling in has slowed, recent earnings reports show. D.R. Horton, which has also increased incentives, reported home sale revenues of $8.6 billion in the quarter that ended June 30, down from $9.2 billion a year earlier, with roughly 1,000 fewer home sales closed. KB Home reported in June that home building revenues were $1.52 billion, down 10 percent from 2024.
Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.
Thank you for your patience while we verify access.
Already a subscriber? Log in.
Want all of The Times? Subscribe.
The post How Builders Are Enticing Buyers in a Weak Housing Market appeared first on New York Times.
