Homebuilders Get Creative to Lure Buyers

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00:00So, Prashant, we know that these homebuilders have been doing these mortgage rate buy-downs,

00:03where if the 30-year fixed-rate mortgage is at 6.5%, they'll bring it down to something lower,

00:09maybe in the 5% range. But your reporting shows that a lot of these homebuilders are managing

00:13to bring down the mortgage rate to something in the neighborhood of 3% or 2% or even 1%,

00:18things we haven't seen since the COVID era. Yeah, I think of it like, you know,

00:23sort of like being at a car dealership or something, the kind of rates they're offering.

00:28Um, so I, you know, I think what it is, is that buyers are really concerned right now

00:35about the economy, about their jobs. So you got to really get their attention. And, you know,

00:425% isn't going to move the needle, they have to get, you know, even more aggressive. So you're

00:48seeing even, you know, fixed rates below 4% for 30 years. And, you know, in one case, it's 3.99%.

00:56But before you get to the 3.99%, which is fixed, you get 0.99% for the first year,

01:041.99% for the second year, and 2.99% for the third year. So it's pretty, pretty great stuff.

01:12Yeah, so that teaser rate, it does go up, but it's still much lower than the average fixed rate. So

01:17part of this is the economics of renting versus buying has changed a little bit here. Because for

01:22the first time in your reporting, you say that the price for a typical new home is cheaper than one

01:27for an existing home. Uh, whereas typically there has been a premium, a premium of about 16%.

01:33How does this change things up for these home builders who now have a lot of unsold inventory?

01:39Yeah, I mean, like it, the, the, uh, new home salespeople need something right to, to, to get

01:45people in, in, in, into, through the door, right? So they, this is what they have. They have these

01:51carrots. Um, but you know, the existing homes, you know, it's really kind of this, the, the big

01:57surprise here is that mortgage rates fell to close to 6%. And, um, builders were hoping that meant they'd

02:05get even more traffic, but, uh, it's kind of worked the opposite way because, you know, existing homes

02:11have gotten more attractive, uh, as a result. And there's a lot more listings for existing homes.

02:17So they're the, you know, it's much harder to sell a new home now.