Homebuilders Increasingly Offer Incentives as Buyers Wait for Lower Rates

The U.S. housing market remains sluggish, and homebuilders are relying more heavily on incentives to attract buyers.

According to the August 2025 National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, 66% of builders reported offering sales incentives, such as mortgage rate buydowns, discounts, or closing cost assistance.

That’s the highest share in at least five years, up from 62% in July.
 

More Discounts, But Affordability Still an Issue

• 37% of builders cut prices in August, little changed from 38% in July.

• The average price reduction was 5%, a level that has held steady since November.

• Builder confidence in newly built single-family homes slipped to 32, down one point from July. Any reading below 50 reflects negative sentiment.

Builders are also facing cost pressures from supply shortages and land-use regulations, making it harder to balance affordability with profitability.

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New Homes vs. Existing Homes: Price Gap Shrinks

A Realtor.com® analysis found that the price gap between new-construction and existing homes narrowed to a record-low 7.8% in Q2 2025.

• Median new-construction price: $450,797 (steady).

• Median existing-home price: $418,300 (+2.4%).

This suggests buyers shopping for new homes may have more room to negotiate, especially with builders offering rate buydowns or closing cost support.
 

Quick Guide: How to Spot the Best Homebuyer Incentives

• Mortgage Rate Buydowns – Builders may cover part of your interest rate for the first few years, lowering monthly payments.

• Closing Cost Assistance – Some builders pay a portion of your closing fees, saving you thousands upfront.

• Price Reductions – Look for advertised discounts (average cuts are about 5% off asking prices).

• Upgrade Packages – Free or discounted appliances, flooring, or landscaping may be included.

• Extended Warranties – Extra protection on systems and structure can add long-term value.

• Flexible Move-In Dates – Builders may offer incentives if you can move quickly into homes already completed.

• Cash Bonuses or Gift Cards – Occasionally offered to sweeten deals for quick sales.

• Compare New vs. Existing Homes – With the price gap at a record low (7.8%), it may cost only slightly more to buy new with better perks.

Tip: Always ask the builder’s sales team what incentives are available. Many deals aren’t advertised publicly.
 

Mortgage Rates and Fed Policy

Mortgage rates fell to a 10-month low of 6.58% in early August as markets anticipated a Federal Reserve rate cut in September.

But recent wholesale inflation data could complicate that outlook.

NAHB Chief Economist Robert Dietz urged the Fed to consider housing affordability as it weighs monetary policy, noting that easing financing costs could help both construction activity and mortgage rates.
 

Regional Breakdown (3-month rolling average)

• Northeast: 44 (down 1)

• Midwest: 42 (up 1)

• South: 29 (down 1)

• West: 24 (down 1)

 

What This Means for Buyers

For prospective buyers, the current market offers a rare chance to secure incentives, like lower mortgage rates or reduced closing costs, that weren’t as common in recent years.

However, affordability remains at historic lows, and many are still waiting for rates to drop further before making a move.

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