Searching for a new custom Florida home while navigating today’s never-boring residential construction market? There IS some recent good news out there, and it concerns perhaps the market’s hottest topic, those headline-grabbing interest rates.
In May, Realtor.com® released its quarterly New Construction Report, which revealed people who bought new-construction homes via mortgages realized a half of a percentage point savings on their interest rate compared to people who bought existing or resale homes.
The reason? Builder incentives. These are special price breaks or limited-time savings offered to boost sales in communities under construction. Incentives have been a key tactic for new-construction builders in the post-pandemic residential housing market and certainly an opportunity for numerous ICI Homes customers.
So, how do interest-rate incentives give new-home buyers a pricing edge? Read on to find out.
Diving into data
The Realtor.com® report covers several topics, but we at ICI Homes are spotlighting the interest-rate savings here. Researchers used mortgage records to track both new-home and resale-home transactions, discovering the recent half-percent-point savings when they examined these data points from 2022 through 2024.
This is the period when interest rates began to rise from low pandemic-era levels as the Federal Reserve tackled post-pandemic inflation. Not surprisingly, as rates rose, the residential real estate market came a bit back down to earth from its exuberant pandemic-era sales and low interest rates.
While the Federal Reserve fought inflation, many home builders offered incentives for buyers of new-construction homes. One incentive was a buy-down opportunity to lower a mortgage’s interest rate (more on that below) Realtor.com® researchers found that the 2024 average mortgage rate for a new build was 6.1 percent while the average rate for a resale was 6.6 percent.
Mortgage rate incentives explained
The above is a significant savings, roughly anywhere from just over $100 to more than $150 on a monthly payment for a 30-year fixed mortgage for a new home priced in the $400,000-and-higher range. This savings also assumes buyers paying the industry-standard 20 percent down payment.
Curious how it works? Customers pay a fee (called points) at the beginning of the buying process to lower their mortgage interest rate. Depending on the incentive, the lower rate can be temporary ( a set number of years), still extraordinary helpful in buyers’ first years as homeowners, or for the entire mortgage term.
Builders offer the incentive through their own in-house financing departments or via arrangements with preferred lenders, and often pay the buy-down fee to facilitate the transaction.
Note that any buyer of any home can buy down a mortgage rate, but when the builder of a new-construction home pays the fee, that’s a big plus (and savings!).
Watch for future incentives
ICI Homes has offered various incentives throughout recent buying seasons, including the mortgage rate buy-down. Follow our socials and check our website to keep tabs on future offers from Florida’s Custom Home Builder.
Ready for your new custom Florida home? Talk to ICI Homes here.
In May, Realtor.com® released its quarterly New Construction Report, which revealed people who bought new-construction homes via mortgages realized a half of a percentage point savings on their interest rate compared to people who bought existing or resale homes.
