New Home Sales Are Slipping: Builder Incentives and Price Cuts

Are builders cutting prices as new home sales cool?

Yes, based on the figures YouTube creator Michael Bordenaro Clips cites, builders are giving ground on both price and incentives. Lennar's average selling price is down $44,000 (about 7%) from a year earlier, and the company is offering incentives equal to roughly 12% of a home's value. KB Home has trimmed its fourth-quarter average price outlook from $500,000 to $480,000. The creator also says new home sales per community fell 18% from August to September, against a normal seasonal dip of about 4%.

For buyers, the practical message is that new construction is no longer the only place to find negotiating room. But the video's framing is sharper than the data it cites, so it helps to separate what is reported from what is interpretation.

What the video reports about builder margins

The core data point is Lennar's gross profit margin: 15.8% for the three months ending in August. The creator says that is the lowest since 2008-2009. Gross margin is revenue minus the direct cost of building and selling homes, before overhead, interest and other expenses. As the creator notes, the bottom-line profit is lower still.

Here are the figures cited, with who they are attributed to:

Treat these as secondhand until checked against the primary sources. Lennar's earnings release and investor materials are the place to confirm margin and incentive figures.

Why incentives matter more than sticker prices

Builders have long preferred to protect the advertised price and discount through other means. A lower list price can reset the value of neighboring homes in a community and affect appraisals. Incentives such as closing-cost credits, upgrades and mortgage rate buydowns keep the headline number intact while lowering the buyer's actual cost.

If the 12% figure holds, the scale is notable. On the creator's $400,000 example, that is $48,000 of value. The video then adds the lower average price on top, which is where the story becomes one of both incentives and prices.

A rate buydown is worth understanding, because it is the most common incentive:

• Temporary buydown: the builder prepays interest so the rate starts lower and steps up. The creator describes a three-year example of roughly 4%, then 5%, then 6%, after which the loan adjusts to the note rate. In practice, many such structures are 2-1 or 3-2-1 buydowns, and terms vary.
• Permanent buydown: the builder pays points to lower the rate for the full 30-year term. This costs the builder more up front.
• Typical size: the creator says builder-financed rates are often one to two percentage points below a standard lender's.

The key point for buyers is that the lower payment is real but is paid for in the home's price structure. If you take the incentive, make sure you know what the home's price, your rate after any step-ups, and your closing costs add up to.

Existing-home sellers are now competing with builders

One of the more useful ideas in the video is that the competitive balance is shifting. For several years, thin resale inventory pushed many buyers toward builders, who could hold firm on pricing. The creator argues that more resale sellers are now pricing realistically, which pulls buyers back toward existing homes and squeezes builders.

He points to Redfin data for the four weeks ending in September: 21% of sellers cut their asking price, and 45% offered concessions such as closing-cost help or repairs. In Atlanta and Nashville, he says about 70% of sellers offered concessions, and notes that these are markets with a heavy builder presence. For more on one of those metros, see our Nashville housing market update.

Inventory is the other piece. The creator cites Realtor.com data showing September inventory only about 5% below September 2019 levels. That is a national average, and he is careful to say many markets remain well below pre-pandemic supply. Where supply is still tight, he argues, prices continue to rise 4% to 6% a year. Our look at buyer demand and seller behavior covers the same tension from the resale side.

Rates make buydowns more expensive

The creator says mortgage rates are already above 7.5% and expects 8% by year-end. That is his forecast, not a certainty, and readers should check the current weekly average from Freddie Mac's Primary Mortgage Market Survey rather than rely on a video's snapshot.

The mechanism he describes is sound, though. The higher the market rate, the more a builder must pay to buy a given rate down by one or two points. That eats into margin. If builders pull back on buydowns, they risk losing buyers who were already stretched. If they keep them, profit per home shrinks. The creator calls it a lose-lose, which is a fair description of the pressure even if the exact outcome is uncertain. For background on how Treasury moves feed through to mortgage pricing, see our piece on Treasury yields and mortgage rates.

Limits and counterpoints to the "crash" framing

The video's title and tone are strong, and several claims deserve caution.

• Annualizing one year. The creator takes Lennar's 7% annual price decline and extends it to a 35% drop over five years to argue for a "crash." Compounding 7% a year over five years would be closer to 30%, and, more importantly, one year of data does not establish a five-year trend. Prices often fall because of mix shifts, such as selling smaller homes or in cheaper regions, rather than the same home getting cheaper.
• Gross margin is not distress. Margins near 15.8% are the lowest in about 15 years by the creator's account, but a margin that is lower than the post-pandemic peak is not the same as losses. Builders had unusually high margins in the recent past.
• Numbers that do not line up. A $44,000 drop equal to 7% implies an average price above $400,000. The $400,000 "median" used for the $48,000 example is best read as illustrative, not as Lennar's actual average.
• Source clarity. The 18% per-community sales drop is not attributed to a named dataset in the video. It differs from the Census Bureau and HUD's monthly new residential sales report, which measures national sales counts and is revised heavily. Check which measure is being used.
• National versus local. Builders in the Sun Belt, where supply is high, face a different market from builders in supply-constrained metros.

None of this means the underlying trend is wrong. It means the evidence supports "builders are working harder to close sales" more firmly than "new home prices are crashing."

What this means for you

If you are a buyer. New construction can offer real value right now, but compare it carefully against resale homes.

• Ask for the full incentive package in writing, including the rate, how long it lasts, and any requirement to use the builder's preferred lender.
• Compare the monthly payment after any temporary buydown steps up, not just the first-year payment.
• Get a quote from an outside lender. Sometimes a closing-cost credit plus your own lender beats the builder's rate offer.
• Look at nearby resale listings. If sellers are offering concessions, you may have more leverage than a builder's fixed incentive suggests. Our guide to buying a home today covers closing costs and negotiation.
• Remember that a builder's incentive may be tied to a specific unfinished home or a quick-close deadline.

If you are a seller. A nearby builder offering a rate buydown is effectively discounting against you. Pricing in line with recent sales and being ready to offer a credit may be more effective than holding out. See our analysis of selling in fall versus spring for what waiting can cost.

If you are a current owner. Your home's value is shaped by local supply, not national headlines. In areas where builders are discounting heavily, nearby resale prices may soften. If you are not planning to sell, the main effect is on your future equity, not your monthly cost.

This is general information, not personalized financial advice. A loan officer or housing counselor can run the numbers for your situation.

What to watch next

Several data points will show whether this is a temporary squeeze or something larger:

1. Builder earnings and guidance. Look for further changes to gross margin, incentive levels and average selling prices in upcoming reports.
2. Weekly mortgage rates. Freddie Mac's survey will show whether rates approach the 8% the creator expects.
3. Official new home sales data. The Census Bureau release will provide a government benchmark for the per-community decline cited in the video.
4. Inventory trends. Realtor.com and Redfin data on listings and price cuts will show whether resale supply keeps returning to pre-2020 norms.
5. Local conditions. Metros such as Atlanta and Nashville, where concessions are reportedly widespread, may be the earliest indicator of how far discounting spreads.

For a broader view of current conditions, see our housing market reality check.