H
omebuyers are facing a challenging market with elevated mortgage rates and high prices. However, new construction homes may be more accessible than initially thought. A recent study from realtor.com shows that the price gap between newly built and existing homes has fallen to a record low.

    Builders are pricing aggressively during this slower selling season, says Joel Berner, senior economist at realtor.com. They're offering incentives like mortgage rate buydowns to attract buyers. Danushka Nanayakkara-Skillington, vice president of forecasting and analysis at the National Association of Home Builders, notes that builders are adding smaller homes and townhomes to their inventory mix.

    To entice buyers, builders are offering a range of incentives, including upgrades and perks like closing-cost assistance and upgraded finishes. Some builders are even offering big-ticket giveaways, such as free cars or Disney cruises. The nation's largest builders are putting significant money on the table, with Lennar averaging 13.3% of sales price in incentives, and PulteGroup more than doubling its incentives.

    Mortgage rate buydowns are also a powerful incentive, allowing buyers to secure rates as low as 5%. Builders like Meritage Homes have promoted mortgage rates as low as 3.99%, plus $5,000 toward closing costs on select homes. D.R. Horton has offered mortgage rate buydowns of 3.99% in select markets.

    Price cuts are also becoming more common, with over one-third of builders reporting price reductions in August. The average price reduction is 5%. Combined with incentives, these discounts are helping to narrow the gap between new and existing homes. In fact, the new-home premium compared to existing homes shrank to just 7.8% in the second quarter.

    The South is seeing some of the best deals in new-home construction, with markets like Little Rock, Ark., Austin, Texas, and Jacksonville, Fla., experiencing significant price drops. Real estate professionals may want to spotlight new construction as an option for their buyers, given the record levels of incentives, higher new-home supply, and historical lows in price premiums compared to existing homes.

    "I think there's a strong value proposition to new construction in today's market," says Jacob Smith, a real estate pro with Northwest Vermont's Lipkin Audette Team. Beyond financial perks, buyers can often choose finishes, enjoy warranty protections, and avoid repair costs that come with older homes.