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Two weeks ago I showed you how a builder’s rate buydown can make your $600,000 house compete like a $525,000 house.
Buyers shop the payment, not the price.
This week, there’s new data on where that pressure lands hardest. It’s right here.
Same buyers. Different builders. Different outcome.
A new study of more than 201,000 closed home sales across 25 markets set out to find what predicts builder discounting.
The strongest signal wasn’t rates, prices, or the local economy.
It was how much of the new home market belongs to national builders.
The cleanest example in the entire study is two suburbs north of Denver: Brighton and Erie.
Same metro. Same rates. Same buyer pool. Same rules. The main difference is who’s building.
· Brighton: national builders sell 50% of new homes. 32% sold at or above asking.
· Erie: national builders sell 75% of new homes. Only 21% sold at or above asking, and Erie builders gave deep discounts twice as often.
Across all Erie sales, resale included, 71% sold below asking with a median discount of 2.5%.
And Erie isn’t cheap. Its $725,000 median was the highest of any suburb in the study.
Why national builders behave this way:
· They spec every home they build, and every finished home that sits costs them money.
Completed homes eat carry, and builders HATE carry.
· They’re working against monthly closing targets. Month end and quarter end, the incentives get louder.
· They’ve got rate buydown budgets that smaller builders, and individual sellers, can’t touch.
Once national builders hold roughly 60% of new sales in an area, the study says incentive competition starts setting what buyers expect to pay. Erie’s well past that line.
If you own an existing home in Erie:
The challenge from my last email gets sharper here.
Your buyer’s toured three model homes before they walk into yours, and every one came with a payment quote built on the builder’s money.
· Price off the builder’s payment, not just your neighbor’s sale. Resale comps alone miss the competition three streets over.
· Watch the calendar. Listing into a builder’s month end push puts you head to head with their best offers.
· Sell what builders can’t: a mature lot, finished landscaping and fencing, no construction zone next door, and a known cost picture.
Many new Front Range subdivisions carry metro district taxes buyers don’t find until they ask.
· If you’re going to give money, point it at the buyer’s rate. Same dollars, bigger payment impact.
Pay attention to what shows up late. Recently my client and I walked away from a new build in three steps:
1. The “requirement.” The builder told us a new solar system was a municipal requirement.
My client, an attorney, made one call to the city. It wasn’t. The only one requiring it was the builder.
2. The fine print. Before telling us what it cost (or even that it was required), they wanted a signature on a 128 page contract.
3. The number. Then came the reveal: a $32,000 solar fee, due at closing.
So, a mandate that didn’t exist, priced by the people who invented it.
You can decide for yourself how much of that $32,000 was solar and how much was margin. I have my number, and it’s over 50.
We walked.
That’s the other side of the incentive game. Money a builder hands you up front can come back to them through fees, add ons, and fine print you’ll only see after you’ve signed.
An existing home doesn’t come with a 128 page surprise.
If you’re buying new in Erie
This is a buyer’s opening. Builders here discount more often and deeper than one town over.
· Time your contract to month end or quarter end.
· Push on price first. As I covered last time, the rate helps while you live there. The price is what you carry when you sell.
· Ask what similar homes sold for without incentives.
· Verify every “requirement” yourself, and get every cost in writing before you sign anything.
One limit on all of it:
Half of recent sellers in the study gave up a mortgage rate between 2% and 4% to move. No builder incentive gets that low. If you’re sitting on a 3% loan, a builder can soften your next payment, but they can’t replace what you’re giving up. Run that number before you fall for a model home.
The bigger picture
This isn’t a Colorado quirk. Kansas City, where national builders hold just 13% of new sales, held price better than any market in the study, with 54% of homes selling at or above asking.
The more national builders in a market, the more everyone in it, builders and existing owners alike, ends up competing on incentives.
Price is what you see. Payment is what buyers decide on. And in Erie, the builder down the street’s setting both.
If you own or you’re buying in Erie and want your numbers side by side with the new construction around you, reply to this email or call me at 303.681.7006.
Peace.
