More than half of home builders offered incentives in May
A majority of home builders offered incentives during the month of May in an effort to improve sales or forestall cancellations during the economic slowdown occasioned by the COVID-19 pandemic, according to a recent National Association of Home Builders/Wells Fargo Housing Market Index survey. However, NAHB says this share was less pronounced than in the previous year or during the 2007-2008 housing crash.
Fifty-two percent of builders said they were offering some sort of incentive. The most common incentives were paying closing costs and fees or offering options and upgrades for reduced or no cost. Nineteen percent of respondents said they were offering these incentives in an effort to shore up sales of their newly constructed homes.
Builders offering incentives were also likely to reduce their home prices or margins. Eighteen percent said they were doing so.
Less common incentives included helping buyers to sell their previous home (6 percent), offering energy efficient features at reduced or no cost (5 percent), absorbing financing points (3 percent), mortgage rate buydowns (2 percent), offering to match future price reductions (1 percent), or trade-in programs (1 percent).
Some of the incentives suggested by the survey were not being offered by any of the respondents, including delaying buyers' mortgage payments, free giveaways, a guaranteed buyback at the original price, and offering job loss protection insurance.
The share of buyers offering incentives was down from the previous year. In April 2019, 64 percent said they were offering incentives to help attract buyers or minimize cancellations.
In May 2007, 73 percent of builders were offering incentives. The share fell to 71 percent in March 2008. NAHB says the latest survey results are comparable to April 2003, when 51 percent of builders said they were offering incentives.
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