Unlocking 4% Mortgages: Your Guide to Affordable Home Financing in 2023
Download MP3Episode Highlights:
- New Phenomenon in Home Buying:
New home builders are shifting demand from resale homes to new builds by offering mortgage rate buy-downs. - Why Demand Dropped for Homes:
- Interest rates spiked, making homeownership more expensive.
- Higher home prices became harder to justify without lower interest rates.
- What Are Mortgage Rate Buydowns?
- Builders offer buy-downs to reduce buyers' mortgage rates (e.g., from 6.8% to 5%).
- Buy-downs can last for a few years or the entire loan duration, mimicking lower-rate periods of the past.
- Benefits for Builders and Buyers:
- For Buyers: Lower payments compared to a simple price reduction.
- For Builders: Avoids lowering comparable sales (comps), preserving neighborhood pricing.
- Why Resale Homes Are Less Attractive:
- Many homeowners are locked into low-rate mortgages (e.g., 3.5%), so they feel no urgency to sell.
- Homeowners can rent out properties or use them for Airbnb, maintaining their equity.
- How Builders Stay Competitive:
- New home builders rely on sales to stay in business.
- Mortgage rate buy-downs help keep construction and sales active, attracting buyers back to the market.
Key Takeaway:
Mortgage rate buy-downs are reshaping the homebuying landscape by making new homes more appealing while helping builders maintain their market share.
Mortgage rate buy-downs are reshaping the homebuying landscape by making new homes more appealing while helping builders maintain their market share.
Listen now to explore the strategies driving this market shift!
