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When you scroll Zillow, you see prices. When a buyer sits down with a lender, they see one number: the monthly payment. That’s the number that decides which house they buy.
Builders figured this out. Here’s what they’re doing, and what it means whether you own an existing home or you’re thinking about buying new.
Two houses. Same price. Different payment.
Say a new build and your house are both listed at $600,000.
The builder offers to spend about $36,000 of their own money to lower the buyer’s mortgage rate, say from 6.25% down to 5%. On a typical low down payment loan, that drops the monthly payment by roughly $450.
Your buyer gets no such deal. Same price, but your house costs them about $450 more every month.
To match the builder’s payment at today’s rates, your house would need to be priced around $525,000.
So your $600,000 house is really competing like a $525,000 house.
The buyer won’t say it that way. They’ll just say yours “felt expensive.”
Why this is happening now.
A national housing newsletter I read this week showed one large builder went from 15% of buyers using low down payment FHA loans in 2022 to 39% today.
More buyers are stretched, and builders are paying to bring the monthly number down to where those buyers can say yes. It’s working. They’re moving new construction product.
If you own an existing home near new construction in Erie, Broomfield, or Longmont:
· Your price tag is not your real competition. The builder’s monthly payment is.
· Cutting $36,000 off your price lowers the buyer’s payment by around $220 a month. Putting that same $36,000 toward lowering their rate can save them roughly twice that. Same money, twice the impact.
· Before you set a price, your agent should put your home’s monthly payment side by side with the new build down the street. Most listing presentations still stop at comparable sales and a price. If yours doesn’t show you the payment comparison, ask for it, or call me and I’ll run it.
If you’re buying a new build and it’s not your forever home:
The low rate feels like a gift. Often it’s not. Builders frequently keep the price high and put the money into your rate instead. The rate helps you while you live there.
But, the price is what you’re stuck with when you leave.
Here’s what that looks like. You pay $600,000 with a low rate. Without the incentive, that house might really be worth closer to $565,000. You just paid about $35,000 more than the house is worth on its own, and that’s your starting line for building equity.
Now say the market treads water for five years. And by the way, it sure could from here.
You sell for about what the house is worth, $565,000. After typical selling costs and paying off the loan, you walk away with roughly $2,000.
Your down payment was about $21,000.
Five years of payments, and you leave with less than you brought.
Your buyer won’t get your low rate. They’ll pay what the house is worth without one. So before you sign:
· Ask what similar homes nearby have sold for without incentives.
· If you might sell in 3 to 7 years, compare the low rate against a lower price. The lower price stays with you when you sell. The rate doesn’t.
· If the builder won’t come down on price, ask yourself how long you really plan to stay.
The bigger picture
Buyers using these low down payment loans are showing more financial strain than other borrowers right now. If that keeps building, it shows up first at the entry level, the exact part of the market builders are leaning on hardest. Boulder at $2M runs on a different clock.
Price is what you see. Payment is what buyers decide on. And what you pay is what you’ll need to get back someday.
If you want to see your home’s numbers side by side with the new construction near you, reply to this email or call me at 303.681.7006.
Peace.
