As Buyer Demand Softens, Builders Are Forced to Lower Prices, Offer Incentives
Over the past several months, builders have been increasingly lowering their prices and offering generous […]
Over the past several months, builders have been increasingly lowering their prices and offering generous incentives to motivate deterred buyers, but today’s concessions are nothing like those seen during the Great Recession.
In order to encourage home sales and limit cancellations, home builders are reducing prices and offering unconventional incentives at a quickening pace, but today’s rising concessions pale in comparison to the deals and price cuts offered during the 2007-2008 Great Recession. Roughly 36% of all single-family home builders reported reducing their prices in November 2022, and while that’s a relatively high share, it’s still far lower than the peak 59% of builders forced to drop prices in October 2007, NAHB reports.
The average reduction was 5% in July 2022, and 6% in three subsequent surveys conducted through November, but during the 2007-2008 housing crisis, the average monthly home price reduction was consistently 7% or higher with a peak of 10% in February 2008.
Meanwhile, the use of sales incentives (price discounts, free upgrades, etc.), which continue to be a standard business model for many home builders, has been on the rise in recent months. For a historical perspective, when NAHB first put this question to builders in May 1995, 74% reported offering sales incentives. The percentage never fell below 50 until July 2022, when it dipped to 43.
