Since the depths of the Great Depression, home builders have sat on the most unsold homes, which gives buyers the opportunity to snap up deals – as long as they are in the right part of the country.
As of February, the builders have completed 119,000 homes that have not yet been sold. To attract buyers, they are pending incentives such as mortgage rate buying, closing cost points, and money used to upgrade. In some cases, they cut the price altogether, which they usually try to avoid, as it hurts early buyers.
Most large builders aim to sell their homes before they can be built. But they also usually “spec” at least establish some properties without the buyer line up. The industry, commonly known as “moving in preparation” or “stocking homes,” attracts buyers who are unable to wait for months and help builders manage costs during uncertain times.
Inventory has been growing steadily since early 2022 as builders are eager to meet pandemic-driven demand, which is associated with higher mortgage rates and worsening affordability, preventing potential buyers. While this means the market has shifted buyer favor, it may not last. Now, many builders are slowing down construction activities while removing backlogs.
“We're all very far away in terms of prices,” said Scott Turner, owner of Riverside Homes, a spec builder in Austin, Texas. He estimates that house prices in urban areas he's focused on falls from peak to trough 30%. “That's the remaining inventory, it's hard to sell. Obviously, it's having a shocking impact on the new starting point.”
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In Killeen, Texas, about an hour north of Austin, real estate agent Stephen Harris saw new homes in the suburbs sell for $50,000 less than the comparable units they received in 2022. The builder's mortgage rate is 1 to 2 percentage points, which has led some of his clients to turn to new buildings, even though they are targeting new older people.
“People find themselves worried about getting into one of these new homes,” Harris said. “But I think the incentives and buying, all of which are enough to shake a lot of people because it can be achieved.”
Khadija Najmi, project manager at a financial services company, recently moved into a stock home built by a large San Antonio builder. She and her husband are relocating from the Dallas area to closer to their family, and they visited older homes, but in part because they received a mortgage rate purchase rate to 4.99%. Save interest rates and they can afford larger property.
“If your interest rates are different, it will vary a lot on the price you can afford and the range you can't afford,” Najimmy said.
However, since moving in in February, she feels different about buying a spec-based home. She and her husband received a $30,000 discount on the house’s list price, as well as free appliances and curtains, and feature many of the features she wanted, such as the spacious his closet and recessed lighting.
However, she was frustrated to find construction flaws, such as kitchen sink faucets, which squirts wildly, broken doorbells and leaky garbage disposal. She wondered if waiting for a longer custom home would prevent some of these problems.
Meanwhile, the house is still rising in many places around her.
“In two days, the foundation has been laid out and the wood has been laid out. It's almost like a house,” she said. “They are building very quickly.”
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While inventory (and buyer incentives) still has a lot of the most aggressive buildings seen in recent years in Texas, Florida, and states like Arizona, the wider housing landscape looks very different from what it looked like when inventory finally hits these levels in 2009.
In many other parts of the country, housing still lacks supply, where competition is fierce.
“In stocks are very tight in top large markets such as the coastal areas of California,” said Ali Wolf, chief economist at data providers Zonda and New Home Source. “There is no land available for development. There is no supply for resale. Supply does not apply to the West Coast. It does not fit the Midwest.”
Builders may also be building more specs homes for strategic reasons. Wolf said more and more buyers are looking for quick move-in options to avoid dealing with uncertainty in mortgage rates. Dillan Krieg, a senior research analyst at John Burns Research and Consulting, said some builders may now tend to build more tariffs and labor costs now.
“If they're spec-based, they can manage costs and hedge hits on some tariffs,” Krieg said.
Trump's latest tariffs sell several key building materials, such as wood, and also exempt taxes from Canada and Mexico, the builders' two key trading partners, and are not allowed to be taxed further. Still, the industry is preparing for rising construction costs, with economists expecting some possible homebuyers to delay purchases due to growing economic uncertainty.
Zonda's recent home builder survey found that about 90% of them were worried about tariffs. But builders usually say they have no choice but to figure out how to deal with these changes.
“The comment is, 'I'm worried, but what should I do?” Wolf said. “'I just have to learn to adapt if it's our new reality.'”
Still, builders who want to clear large amounts of stocks are in a tough position, Krieg said. Incentives such as exchange rate purchases may remain a key strategy to get customers into the door.
“Builders really don’t have a lot of pricing power right now,” he said.
Claire Boston is a senior journalist at Yahoo Finance, covering housing, mortgages and family insurance.
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