Builders Are Sweetening the Deal: Why Home Buyers May Want to Take a Look
REALTOR® Magazine MediaReal Estate News
August 22, 2025
From mortgage rate buydowns to steep price cuts, record incentives are helping shrink the gap between new and resale homes.
© AnthonyRosenberg / iStock / Getty Images Plus
Home buyers today are navigating elevated mortgage rates and high prices that have been blamed for straining budgets. At first glance, new construction—which often carries a premium over resale homes—may seem out of reach. But a new study from realtor.com® shows the price gap between newly built and existing homes has fallen to a record low.
Besides lowering prices, builders also are stacking on sales incentives—like mortgage rate buydowns—hoping to tempt more home buyers with savings.
Builders Are Pricing to Get Buyers Moving
“Builders are pricing really aggressively during this slower selling season,” says Joel Berner, senior economist at realtor.com®. “They’ve got inventory that they need to move. They’ve got a lot of incentives in place that are helping people get into these homes, and it’s really a good option for buyers—all over the price spectrum.”
To help lower costs, builders also are adding smaller homes and townhomes to their inventory mix, says Danushka Nanayakkara-Skillington, vice president of forecasting and analysis at the National Association of Home Builders. Townhomes made up one in five new single-family starts in the first quarter of this year, near an all-time high, according to the trade group.
“Builders are cognizant of the affordability issues facing people all over the country, and they’re responding,” Berner adds.
The Incentives Race
The list of enticements is growing. “Builders are definitely trying to get buyers’ attention with incentives,” says Nanayakkara-Skillington. Here are some of the ways:
Upgrades and perks: Two-thirds of builders offered some form of incentive in August—the highest share in at least five years, recent NAHB data shows. These range from closing-cost assistance to upgraded finishes, like decks or finished basements. Some builders have even dangled big-ticket giveaways.
“There are some big incentives in some markets, big price reductions, significant rate buy-downs, and I even saw some offering free cars or a Disney Cruise—if you buy now,” says Jacob Smith, a real estate pro with Northwest Vermont’s Lipkin Audette Team, part of Coldwell Banker’s Hickok & Boardman, and a lead sales agent for the new-home community Hillside at O’Brien Farm.
Some of the nation’s largest builders are putting serious money on the table. At Lennar, incentives averaged 13.3% of the sales price in the second quarter—nearly $60,000 on a $450,000 home. “These are outsized [incentives] for the moment,” co-CEO Stuart Miller said earlier this year. “Normalized incentives should be around 5% to 6%.”
PulteGroup also has more than doubled its incentives, jumping from $18,000 to $21,000 on a $600,000 home to more than $52,000 per sale recently.
Mortgage rate buydowns: Another powerful incentive lately is the mortgage rate buydown. These deals can shave rates from the high-6% range into the 5% range—or lower—for the life of the loan. A realtor.com analysis shows buyers of newly built homes secured rates about half a percentage point lower, on average, than those buying resale homes, translating into about $105 in monthly savings on a $400,000 home. “In this high-rate environment, a lower mortgage rate can go a very long way,” Berner says.
Some builders are making headlines with aggressive offers. This spring, Meritage Homes promoted mortgage rates as low as 3.99%, plus $5,000 toward closing costs on select homes.
D.R. Horton, in select markets, has also offered mortgage rate buydowns of 3.99%, mostly for buyers with a Federal Housing Administration loan who might not qualify for conventional financing. The national builder is reportedly offering mortgage rates to buyers of its new homes that are 1–1.5% below current rates.
Price cuts: Builders aren’t just leaning on incentives—they’re cutting list prices, too. In August, more than one-third—or 37%—of builders reported lowering prices, the highest share since 2022. The average price reduction is 5%, NAHB data shows. Combined with incentives, these discounts are helping to narrow the gap between new and existing homes.
In fact, the new-home premium compared to existing homes shrank to just 7.8% in the second quarter, an all-time low. The median price of a newly built home has held steady, listed at $450,797, while existing home prices have continued to rise, reaching $418,300, according to the realtor.com® analysis.
The South is seeing some of the best deals in new-home construction. The five markets with the largest drops in new-home prices, according to realtor.com®, are:
- Little Rock, Ark.: -15.6%
- Austin, Texas: -8.5%
- Wichita, Kan.: -7.9%
- Jacksonville, Fla.: -7.8%
- Cape Coral, Fla.: -7.4%
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