Builders offering valuable incentives to entice homebuyers

abcnews.go.com:

Americans looking to buy a newly built home this spring are likely to get a helping hand with their mortgage rate and other costs

LOS ANGELES — Americans looking to buy a newly built home this spring are likely to get a helping hand with their mortgage rate and other costs.

Many homebuilders are offering buyers valuable incentives like paying down their mortgage rate, covering closing costs or even throwing in “flex dollars” that home shoppers can put toward upgrades or other costs.

While the sales strategy isn’t new, builders are under pressure this year to ramp up such incentives because they’re facing a tough spring homebuying season.

Stubbornly high mortgage rates, more competition from existing homes on the market and the realization that years of rising home prices have pushed affordability to the limit for many prospective buyers gives builders little opportunity to ease off the costly incentives.

“They’re running into more competition, fewer buyers and increased costs to sell a home,” said Ali Wolf, chief economist at Zonda.

And dialing back incentives may not be easy, as home shoppers have now come to expect them.

“We should anticipate that builder incentives are here to stay,” Wolf said. “I don’t see a world where they don’t need them, unless interest rates came down, and most signs point to higher-for-longer with interest rates.”

Elevated mortgage rates and rising prices have kept many prospective home shoppers on the sidelines, especially first-time buyers who don’t have equity from an existing home to put toward a purchase. While mortgage rates have eased in recent weeks, the average rate on a 30-year mortgage has been hovering around 7% since November after climbing from a 2-year low of just over 6% in