With fewer homes available and bidding wars driving prices up, prospective homebuyers need help with their choices. But one option that may offer better results is looking at new construction homes for sale. Existing homeowners have little incentive to sell given the current mortgage rates, and a majority bought their homes when rates were sub-3%.
They’re More Affordable
Homebuyers face a tough choice with mortgage rates at their highest levels in two decades. They can save money by buying a new construction home from New Home Star. Experts don’t expect to see an improvement in the housing market’s inventory this year. The reason is that current homeowners need more incentive to sell. Many bought homes this year or earlier when mortgage rates were much lower, and they’re reluctant to take on a higher rate.
That doesn’t mean prospective buyers won’t find a way to buy a home this year. A recent Redfin report found that some would be willing to sacrifice specific home features if it meant they could get into a house more quickly. Some builders have been experimenting with financial incentives, such as offering to lower buyers’ interest rates for the first couple of years of the loan.
They’re Often More Flexible
As mortgage rates climb, many would-be buyers get cold feet and cancel their home-purchase agreements. For many of these buyers, the solution is seller financing, in which a private homeowner takes on a purchase-money mortgage for the buyer (along with any required down payment). The benefits to buyers are significant: They don’t need to pass strict loan approval procedures and can close faster without waiting until a bank approves their loan.
The benefits for sellers could be more precise, but low mortgage rates could spur existing homeowners to sell their homes and free up inventory. Builders are taking note: Several have cut prices in recent months, and some even offer to help with buyers’ closing costs or offer options or upgrades at no extra cost.Â
They’re More Convenient
The sellers of a private sale do not list their property with the Multiple Listing Service (MLS). It reduces the pool of prospective buyers. However, private sellers will be willing to work with the right prospects. As a result, they may be more willing to compromise on specific terms of the deal. For example, the buyers could negotiate a lower selling price with the seller. They may also be more receptive to a flexible closing date.
Additionally, a private seller will have different profit margins and commissions that are associated with a real estate agent, which may make them less likely to take a hard line in negotiations. It gives the buyer more bargaining power and helps to level the playing field in the negotiating process. It’s helpful when dealing with a private seller looking to move quickly and wanting to sell their home as soon as possible.
They’re More Efficient
Homebuilders are working to ramp up production, but their inventories still need to meet demand. That’s why many builders offer buyers incentives to close on their homes, such as paying closing costs or fees and offering options and upgrades at no additional cost. For homebuyers, those incentives could be key. A recent survey from Redfin found that mortgage rates continue to spook prospective buyers, and most expect to wait until those rates stabilize before buying again.
Those rising interest rates are also a significant reason why more people are turning to new construction homes today. Traditionally, new homes have been more expensive than existing ones, but the gap is shrinking. In fact, in some locations, it’s now about the same price to buy a new home as it is to purchase an existing one. That’s good news for borrowers, but it’s creating a stricter sell for homebuilders. Only when those mortgage rates drop will selling enough new homes to balance out the market will be accessible.
