: Some home builders are offering mortgage rates as low as 3%. Here’s how — and why — they’re doing it.

by | Jan 19, 2023 | Stock Market

Home builders are playing hardball by offering mortgage rates as low as 3% on new homes to boost buyer demand. So how and why are they doing that? For starters, home builders are feeling a lot less gloomy these days, as mortgage rates dip and buyer demand picks up. Mortgage demand surged on Wednesday, with buyers rushing in to catch a dip in rates.

“There is considerable pent-up demand for people to get into homeownership,” Jason Will, senior vice president of market growth at Embrace Home Loans, told MarketWatch. The lender is based in Newport, R.I., and generated over $6.5 billion in mortgages in 2022 for 20,000 homeowners. Some builders are upping the ante by offering very low interest rates for buyers. In California, Pacific Point Communities is offering a 4-bedroom home at a mortgage rate “as low as 2.75%.” In Texas, Pulte Homes is offering a 30-year fixed-rate mortgage at 4.25% for single-family homes from three to five bedrooms. And in various parts of the country, K. Hovanian is offering a fixed-rate mortgage at 4.99%. Yet, the 30-year fixed-rate mortgage is at 6.04%, according to Mortgage News Daily, which is still double where it was a year ago.  By offering to bring buyers’ mortgage rates down, these home builders are throwing out concessions instead of cutting prices to entice buyers stuck on the sidelines. How exactly can builders offer such low rates?  Home builders have more margin built into their financial model that allows them to offer bigger concessions to homebuyers, Embrace’s Will explained. Margin refers to the profit builders make selling a new home, after accounting for construction costs, and other expenses. “They’re able to use [that] to finance both …

Article Attribution | Read More at Article Source

Share This