Home builders

Sun Belt homebuilders slash prices amid rising inflation and interest rates

Redfin’s Glenn Kelman (iStock)

As the United States grapples with rising inflation, rapidly rising interest rates have forced Sun Belt homebuilders to make a bold move: cut prices.

The combination of rising mortgage rates, low housing inventory and inflation have dampened demand in Sun Belt states such as Texas as some builders are now finding ways to navigate the housing market by increasing the share of new construction deals with price cuts, Bloomberg News reported.

In Austin, new construction offerings with price reductions quadrupled from a year earlier, according to Redfin Corp.. The builders of houses that were once artificially restrict their sales by not taking new orders are now seeing more inventory to work with.

“We’re in a different place – the builder can no longer name a price and say ‘pay it or go your way,'” Nicole Freer, an agent in Houston, told the outlet. She’s seen similar price changes around the city and even reduced the prices of her own ads by $2,000 to $20,000.

Homebuilders typically view price cuts as a last resort when demand drops, first trying to boost sales with additional amenities — granite countertops or sub-zero appliances — to avoid upsetting customers. who bought earlier at higher prices.

According to Ali Wolf, chief economist of real estate data group Zonda, the market is starting to change. His company mainly tracks new construction and started hearing about price cuts around the end of May and into June.

“The builders that are cutting prices are also the ones that have raised prices the most over the past six to 12 months,” she said.
The cuts came from a mix of small private builders as well as large public builders, according to the publication. DR Horton, Meritage Homes and Lennar, which have listings in Florida, Texas and Arizona, have made their discounts public, showing how many builders tend to offer a lower rate for new homes.

Jim Zeumer, vice president of investor relations at Pulte, an Atlanta-based builder, said the price reductions listed on his website were typical incentives used to sell specific homes or homes built without a buyer that will be completed at a later date.

“We’ll typically have one or two specs completed in a community, but we’ll use incentives to manage inventory levels over the life of a community,” he said.

[Bloomberg] — Jacques Bell