Searching for a new custom Florida home while navigating today’s never-boring residential construction market? There IS some recent good news out there, and it concerns perhaps the market’s hottest topic, those headline-grabbing interest rates.
The reason? Builder incentives. These are special price breaks or limited-time savings offered to boost sales in communities under construction. Incentives have been a key tactic for new-construction builders in the post-pandemic residential housing market and certainly an opportunity for numerous ICI Homes customers.
So, how do interest-rate incentives give new-home buyers a pricing edge? Read on to find out.
Diving into data
The Realtor.com® report covers several topics, but we at ICI Homes are spotlighting the interest-rate savings here. Researchers used mortgage records to track both new-home and resale-home transactions, discovering the recent half-percent-point savings when they examined these data points from 2022 through 2024.
This is the period when interest rates began to rise from low pandemic-era levels as the Federal Reserve tackled post-pandemic inflation. Not surprisingly, as rates rose, the residential real estate market came a bit back down to earth from its exuberant pandemic-era sales and low interest rates.
While the Federal Reserve fought inflation, many home builders offered incentives for buyers of new-construction homes. One incentive was a buy-down opportunity to lower a mortgage’s interest rate (more on that below) Realtor.com® researchers found that the 2024 average mortgage rate for a new build was 6.1 percent while the average rate for a resale was 6.6 percent.
Mortgage rate incentives explained
The above is a significant savings, roughly anywhere from just over $100 to more than $150 on a monthly payment for a 30-year fixed mortgage for a new home priced in the $400,000-and-higher range. This savings also assumes buyers paying the industry-standard 20 percent down payment.
Curious how it works? Customers pay a fee (called points) at the beginning of the buying process to lower their mortgage interest rate. Depending on the incentive, the lower rate can be temporary ( a set number of years), still extraordinary helpful in buyers’ first years as homeowners, or for the entire mortgage term.
Builders offer the incentive through their own in-house financing departments or via arrangements with preferred lenders, and often pay the buy-down fee to facilitate the transaction.
Note that any buyer of any home can buy down a mortgage rate, but when the builder of a new-construction home pays the fee, that’s a big plus (and savings!).
Watch for future incentives
ICI Homes has offered various incentives throughout recent buying seasons, including the mortgage rate buy-down. Follow our socials and check our website to keep tabs on future offers from Florida’s Custom Home Builder.
Ready for your new custom Florida home? Talk to ICI Homes here.