DALLAS–While housing sales have seen a recent uptick in one month’s data, overall sales are declining in many markets, leading builders to offer price cuts, free upgrades and even prizes and free trips to brokers.
The inducements are being offered by “increasingly desperate homebuilders,” as “hot markets are cooling fast as interest rates rise,” according to Bloomberg. The result, the analysis suggests: “shoppers are reclaiming the upper hand, after years of soaring prices that placed most inventory out of reach for many families.”
In September, home sales were at their slowest since December of 2016, and sales of previously owned homes dropped for a sixth straight month, the worst streak since 2014, Bloomberg reported. The markets have noticed, with homebuilding stocks having lost more than a third of their value this year, the analysis added.
And there is even some good news, with rising wages allowing more people to purchase homes, and some smaller markets, such as Columbus, Ohio and Grand Rapids, Mich., remaining as strong as ever, Bloomberg said.
“But the shift is especially striking given the robust U.S. economy,” according to the report.
What’s Hurting Sales?
Hurting sales are rising interest rates, changes to the tax code that have placed caps on deductions for mortgage interest and property taxes, in some markets, immigration restrictions have made high-skilled workers in places such as Austin and San Jose “nervous about buying, and a strengthening dollar makes property less appealing to South Americans buying homes in Miami and Chinese buyers picking up properties in California’s Orange County, Bloomberg said.
In Seattle, where home prices have doubled since 2012, Bloomberg reported builders are offering cash for customers to “buy down” mortgage rates—that is, pay to get a lower interest rate. “Builders are calling us,” Andy McDonough, senior vice president at HomeStreet Bank, which works with the companies on such promotions, told Bloomberg. “They weren’t doing this earlier because buyers were lining up.”