Higher mortgage rates don't only create challenges for buyers. They can also affect how you position your home when it's time to sell.
That's because affordability is top of mind for today's buyers. As mortgage rates rise, even a small increase can have a meaningful impact on the monthly payment. So buyers are looking for opportunities to make the overall cost work for their budget. In some markets, new construction is giving them another option.
If you're planning to sell, that doesn't mean your home can't compete. But it does mean you need to know how builders are attracting buyers and what you can do to make your property stand out.
Builders Are Competing on the Monthly Payment
New construction has an advantage in today's market that existing homes don't always have. While sales of previously owned homes continue to face pressure from higher mortgage rates, sales of newly built homes have been holding up somewhat better.
In a recent interview, Logan Mohtashami, Chief Economist at HousingWire, explains that new-home sales have reached an 8-month high and are now tracking around 2019 levels. Existing-home sales, meanwhile, remain well behind, coming in roughly 1 million sales below 2019 levels.
One of the biggest reasons builders have been able to adapt to higher mortgage rates is the incentives they're offering buyers. According to Realtor.com, nearly 1 in 5, or 18.8%, of newly built homes currently advertise some type of buyer incentive upfront:
The most common incentive may not be what you'd expect. As the graph shows, many builders are offering lower mortgage rates, often through what's known as a rate buydown.
With a rate buydown, the builder pays an upfront cost to help reduce the buyer's mortgage rate, which can also lower their monthly payment. That's a clear advantage for buyers, while builders benefit by making their homes more affordable and easier to sell. It's a strategy that can work for both sides, which is why reduced rates are offered on 13.8% of new-home listings.
In some cases, builders are offering rates below 6%, and sometimes well below it. That can reduce a buyer's monthly payment by hundreds of dollars, which can make a meaningful difference for buyers already feeling the pressure of today's affordability challenges.
So, How Can Sellers Like You Compete?
First, don't assume a mortgage rate buydown is something only builders can offer. Depending on the loan and transaction, sellers can also contribute toward a buyer's rate buydown. But does that mean you need to offer one to compete? Not necessarily.
A buydown is just one tool you can consider. Depending on your local market and the buyer you're working with, another strategy may make more sense. You could adjust the price, contribute toward closing costs, take care of needed repairs, or highlight the features your home offers that a new construction property can't.
That's why having an agent who understands your local competition is so important. Joel Berner, Senior Economist at Realtor.com, explains:
Sellers of existing homes are facing a lot of competition from the new-home space. . . so sellers should highlight the local amenities of their neighborhoods in contrast to the more suburban or exurban communities where many new homes are built.
A strong agent will help identify those advantages and make sure they come through in your listing. The goal is to show buyers exactly what makes your home different. And don't overlook the value of being willing to make a few compromises or offer concessions when appropriate. A little flexibility can go a long way toward making your home more appealing to today's buyers.
Today's Market Rewards Sellers Who Adapt
Builders have also been faster to adjust their prices to reflect what buyers can realistically afford and where demand is strongest. In some areas, that flexibility is putting additional pressure on the resale market. Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), puts it this way:
. . existing homeowners now have to do the price discovery that builders have been doing since 2022.
That's an important point to keep in mind if you're planning to sell.
It doesn't mean you automatically need to cut your price or offer a significant concession. But it does mean your pricing and marketing strategy should reflect what buyers can afford today, rather than what homes were selling for a few years ago.
And remember, the impact of new construction isn't the same everywhere. Builders make up a much larger share of the competition in some markets, and incentives can vary significantly from one area to another. That's why it's important to work with an agent who can help you understand how much builders are actually competing with your home locally.
Bottom Line
Higher mortgage rates are making buyers more selective about where they spend their money. Builders know that, and many are responding with lower mortgage rates, closing-cost assistance, price reductions, and other incentives to win buyers over.
If you're thinking about selling, don't let new construction or competing listings put you at a disadvantage. Let's look at what buyers are being offered in your local market, identify what makes your home stand out, and build a strategy that positions your property to compete and get you the strongest possible result. Reach out to us to get started.
