BUSINESS cargoshippingtimes 11/15/2025 0 Comments

Homebuilders bet on 1% mortgage rates to wake up US buyers – The Denver Post

By Prashant Gopal, Bloomberg News

With the average mortgage rate approaching 6%, US home buyers are looking for the cheapest monthly payments of the year. But San Antonio real estate agent Tavin Wyman knows how to cut it low—very low.

The method is simple: buy new.

In US markets, homebuilders with unsold inventory are subsidizing mortgage rates so heavily that they have at times matched record lows recently seen during the Covid-19 pandemic. It does not include amenities such as free utilities, a finished basement, and closing costs.

Wyman said a major private developer recently offered a buyer a flat rate of 3.49% on a $414,000 home on the city’s west side. The sales agent even increased the woman’s commission to cover the buyer’s lease violation costs and threw in an extra $2,000 to make the first month completely free.

“You want to pay $2,000 a month for a new 4-bedroom house and get a 2% rate, I can find one right now — it sounds crazy,” Wyman said. “Everything is negotiable.”

A single mother moving from Florida is attracted to the 3.99% fixed interest rate offered by the DR Horton Company, the largest US lender by stock market value. But it was the introduction rate of less than 1% in the first year that really caught his attention, Wyman said.

This is not the benefit of a healthy housing market. It’s an industry tactic to lure customers as tariffs, government shutdowns and artificial intelligence increase feelings of job insecurity.

According to staffing firm Challenger, Gray & Christmas, year-to-date layoffs hit 1 million, the highest number since the pandemic. Just last month, companies announced 153,000 layoffs, the largest October number since 2003.

This concern drowns out the predicted increase in home buyer demand as mortgage rates fall.

“We expect to see a bigger impact from the mortgage rate cuts that we’ve seen,” DR Horton CEO Paul Romanowski said on a call with analysts last month. “It’s really bad.”

Other developers have expressed disappointing responses from the market. Century Communities Inc. said in its earnings report that entry-level customer demand was weak. PulteGroup Inc. said first-time customer orders fell 14% last quarter from a year earlier.

“Lower interest rates are positive for housing demand, but interest rates don’t operate in a vacuum,” Ryan Marshall, chief executive of Platt Group, said on an earnings call last month. “If interest rates go down there is a clear impact because the economy is slowing and people are worried about their jobs.”

The biggest hurdle for new selling agents is that renting is now much cheaper than buying. Rents are starting to fall, and landlords are reporting retention rates near record highs.

At the same time, resale inventory is no longer limited, giving the buyer many more options. However, only a few pieces. The rest of the sales stalled in September, still slightly above record lows.

“The current market is more competitive than ever for homebuilders,” said Mark Zandi, chief economist at Moody’s Analytics. “Given the lack of hiring of workers, there are a lot of concerns about job security. And artificial intelligence (AI) is starting to emerge.”

For the first time ever, new home prices in July and August were cheaper than existing homes, according to Census and National Association of Realtors data from John Burns Research and Consulting. The average premium since 1973 is 16%. Incentives are not included in the analysis.

Manufacturers spent an average of 7.5% of sales on incentives in the three months ending in August, up from 4.8% in May 2024, according to the company’s Manufacturer Survey.

“There is an opportunity to buy a new home at a very low price,” said Eric Finnegan, vice president at John Burns. “The big surprise is why sales are still weak.”

But not all interest rate shopping is created equal. Some banks lower borrowing costs permanently for the full 30-year term, while others keep interest rates low only temporarily. The deal can work well for families hoping for income or refinancing in the future — but it carries real risks for borrowers who aren’t prepared for an increase in monthly payments after the promotional period ends.

Lennar Corp. is having “closeout inventory sales” nationwide, offering a 3.75% discount in Denver and a discount of up to $70,000 in Charleston, South Carolina. Lennar is spending 14% on incentives per home as a profit share this year, up from 10% in 2024.

The strategy of shrinking the sales market seems to be working, at least according to Wiman. A San Antonio agent said seven of the eight homes he sold this year were newly built.

“New home buyers expect so much that you have to get more,” Wiman said. “I always declare that I will never pay closing costs to a customer, especially now.”

– Courtesy of Julia Fanzries.

(Updated with October holidays in paragraph 8.)

zimonenews.com