Homebuilders are sitting on the most unsold homes since the depths of the Great Recession, giving buyers a chance to snag deals — provided they’re in the right part of the country.
As of February, builders had completed some 119,000 homes that weren’t yet sold. To lure buyers, they’re dangling incentives like mortgage rate buydowns, closing cost credits, and money toward upgrades. In some cases, they’re slashing prices altogether, something they usually try to avoid because it hurts earlier buyers.
Most large builders aim to sell homes before they finish the construction. But they also typically build at least some properties “on spec,” without a buyer lined up. Spec properties, often called “move-in ready” or “inventory homes” by the industry, appeal to buyers who can’t wait months before they move and can help builders manage their costs during uncertain times.
Inventory has been steadily growing since early 2022, after builders that rushed to meet pandemic-driven demand ran up against higher mortgage rates and worsening affordability that shut out potential buyers. While that means the market has turned in buyers’ favor now, it may not last. Many builders are now slowing down construction activity while they clear their backlog.
“We fell pretty far in terms of prices,” said Scott Turner, the owner of Riverside Homes, a spec builder in Austin, Texas. He estimates that home prices in the urban parts of the city where he focuses dropped 30% from their peak to their trough. “That’s left builders with inventory that’s very difficult to sell. What that does, obviously, is have a chilling effect on new starts.”
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In Killeen, Texas, about an hour north of Austin, real estate agent Stephen Harris has seen new construction homes in the suburbs sell for $50,000 less than what comparable units fetched in 2022. Builders are offering mortgage rate buydowns of 1 to 2 percentage points, which has steered some of his clients toward new construction even if they were initially targeting older homes.
“People find themselves nervous about getting into one of these newer homes,” Harris said. “But I think the incentives and buydowns, all of that is enough to sway a lot of people because it makes it attainable.”
Khadija Najmi, a project manager at a financial services company, recently moved into an inventory home constructed by a large builder in San Antonio. She and her husband, who were relocating from the Dallas area to be closer to family, toured older homes but landed in new construction in part because they received a mortgage rate buydown to 4.99%. With the rate savings, they were able to afford a bigger property.
“It makes a huge difference in what you can afford and what you can’t if you have a different interest rate,” said Najmi, 32.
Since she moved in in February, though, she’s had mixed feelings about purchasing a spec home. She and her husband received $30,000 off the house’s list price, plus free appliances and window shades, and it has many features she was looking for, like spacious his-and-hers closets and recessed lighting.
But she was frustrated to find construction defects like a kitchen sink tap that sprays water wildly, a broken doorbell, and a leaky garbage disposal. She’s wondered if waiting longer for a custom home would have prevented some of those issues.
In the meantime, homes are still going up in the lots around hers.
“In two days, the foundation is already laid out, and the lumber is already laid out. It’s almost like a house,” she said. “They’re being built very fast.”
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While inventory — and buyer incentives — remain plentiful in Texas, Florida, and states like Arizona that have seen some of the most aggressive building in recent years, the broader housing landscape looks far different than when inventory last reached these levels in 2009.
Homes are still in short supply in many other parts of the country, and there, competition is fierce.
“In top big markets like coastal California, inventory is incredibly tight,” said Ali Wolf, chief economist at data provider Zonda and New Home Source. “There’s no developable land. There’s no resale supply. The run-up in supply does not apply much to the West Coast. It does not apply that much to the Midwest.”
Builders are likely also building more spec homes for strategic reasons. More buyers are seeking quick move-in options to avoid dealing with mortgage rate uncertainty, Wolf said. And some builders may be inclined to build more now to help deal with uncertainty around tariffs and labor costs, said Dillan Krieg, a senior research analyst at John Burns Research and Consulting.
“If they build on a spec basis, they’re able to manage their costs and hedge against some of those hits from tariffs,” Krieg said.
Trump’s latest tariffs carved out several key building materials like lumber, and also exempted Canada and Mexico — two key trading partners for builders — from further levies. Still, the industry is bracing for construction costs to rise, and economists expect that some would-be homebuyers may delay purchases amid growing economic uncertainty.
Zonda’s recent homebuilder surveys found that around 90% of them were worried about tariffs. But builders generally say they have no choice but to figure out how to deal with the changes.
“The comments are, ‘I’m worried, but what can I do about it?” Wolf said. “‘I just have to learn to adapt, if this is what our new reality is.’”
Still, builders with large amounts of inventory they hope to clear are in a tough spot, Krieg said. Incentives like rate buydowns will likely remain a key strategy to get customers in the door.
“Builders really do not have a lot of pricing power right now,” he said.
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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