Price discounts for new homes are drying up as demand rebounds, homebuilders say
- Fewer homebuilders are offering discounts on new homes, as confidence in future demand strengthens.
- The share of builders reducing prices was 30% in April, down from 36% in November, NAHB said.
Homebuilders are growing less likely to offer discounts on new homes, as their optimism about the housing market edged higher for a fourth month.
According to the National Association of Home Builders/Wells Fargo Housing Market Index, the share of builders reducing prices was 30% in April.
That's down from 31% in the previous two months. Meanwhile, 35% had reduced prices in December and 36% in November.
The average price reduction in April was 6%, the same as in February and March, but lower than the 8% seen in December, NAHB added.
And while the share builders relying on incentives to increase sales moved up to 59% in recent months, it is still under December's rate of 62%.
Although builders are still contending with shortages in material supply, the NAHB's overall homebuilder confidence reading rose to 45, as mortgage rates continue to slide down and boost demand. That's as sales expectations in the next six months increased to 50, a level not reached since June 2022.
"For the fourth straight month, builder confidence has increased due to a lack of resale inventory despite elevated interest rates," said NAHB Chairman Alicia Huey in a release. "Builders note that additional declines in mortgage rates, to below 6%, will price-in further demand for housing."
The 30-year fixed rate has slid to 6.4% from last year's peak of 7%. And earlier worries that March's banking turmoil may cut lending to home builders has yet to manifest.
Last month's collapse of Silicon Valley Bank spurred worries about other regional banks, which are top lenders for the real estate market.
"While [acquisition, development and construction] loan conditions are tight, there is not significant evidence thus far that pressure on the regional bank system has made this lending environment for builders and land developers worse," NAHB Chief Economist Robert Dietz said.