As new home market shifts, builders offer big incentives
PHOENIX (3TV/CBS 5) - When mortgage interest rates started to go up, Andrew Behan thought he was getting priced out of a new home for his cross country move from Florida to Arizona.
“Interest rates just kept rising. Price points were all over the place,” he said. “It’s been quite a journey. The market changed, and new home builders began offering incentives. Some features that would have been expensive upgrades a few months ago are now being included in the sale price of the home. Builders are also offering money toward closing costs and to buy down interest rates. “They were willing to work with us, not only on the interest rate but also home price,” Behan said. “Throw in the closing costs, it made it pretty hard to say no.”
Valley real estate agents have experienced the shift, too. “Six months ago, we couldn’t even get a return call from buyers reps,” Trevor Halpern said. “Now the pendulum has really swung on those new build communities, and these new home builders are willing to come to the table with meaningful concessions.” For example, Toll Brothers recently launched promotion advertising a “free resort-style pool” valued at up to $50,000.
According to the U.S. Census Bureau, in September, there were 135,000 new homes sold in the Western region of the country. That’s a 30% drop compared to the same time last year, according to seasonally adjusted data. Nationwide, the Census Bureau also shows a supply of more than nine months of new homes for sale. “New builds are a little bit more saavy when it comes to these market dynamics and what they need to do to get homes sold, so they’re probably a little quicker to the draw as far as lowering prices or offering incentives,” said Ryan Sandell from NFM Lending.
Sandell says there are ways to combat rising mortgage rates. One potential option is called a two one buydown. “Say the market rate today is 6.5%,” he said. “The first year they would be at 4.5%. The second year they would be at 5.5% and for the rest of the time, the 28 years would be at 6.5% and the goal would be that bridges you to a lower rate environment to where you can refinance.”
Behan chose a more traditional interest rate buydown. locking in his rate for the life of the loan. “That was the big factor for us because you didn’t have to look over your shoulder 12 months from now,” he said. With the house close to completion, he’s ready to make the move from the Sunshine State to the Copper State.
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