New Construction: Price Drops, Incentives, and More!
Updated: Sep 20, 2022
As their trust in the market continues to decline, more homebuilders are decreasing their prices.
The National Association of Home Builders/Wells Fargo Housing Market Index's measure of homebuilder confidence dropped 3 points to 46 in September. Anything less than 50 is seen negatively.
With the exception of a brief decline during the beginning of the coronavirus pandemic in 2020, this marks the ninth consecutive month of reductions and the lowest level since May 2014. In January of this year, when interest rates were roughly half what they are now, sentiment was at 83.
Builders attribute their declining sentiment to rising rates. According to Mortgage News Daily, the 30-year fixed average started this year at about 3% and then gradually increased, briefly reaching 6% in June. It then started to decline again, almost reaching 5% in August, before quickly regaining ground and going back over 6% this month. The already expensive housing market became even more unaffordable as a result. As long as inflation is high, the Federal Reserve is anticipated to increase its benchmark rate once again this week.
Builders are offering massive incentives to qualified buyers. This can range from paying a percentage of your closing costs (Generally 1-3%), increasing allowances for design options, rate buy downs, reducing or removing lot premiums, and reducing prices.
Builders worked tirelessly to increase production in North Carolina during the 2020-2021 housing boom. Many are now sitting on excess spec home inventory and plenty of vacant lots ready for building.
The incentives alone are enough to make the sting of higher rates slightly less painful.
Remember, always have an agent who represents you and your interests when pursuing new construction. The agent's working in the model homes represent the builder and developers' interests. It costs you nothing to have your own agent, so why take the risk?
See new construction options in The Triangle and Triad regions