Buying New Construction Now: Why This Could Be The Turn
Over the past year, new homes have gone from “for sale” to “on sale.” If you are new home shopping there is a lot to appreciate; improving interest rates, more inventory and choices. While that is good news in any market, incentives on new homes are piling up. Builders are telling me that things are still selling despite less foot traffic than last summer. It does not add up, but the National Association of Home Builders reports that builder confidence is rising. Real estate is a proposition that favors sellers the majority of the time and the last time we saw a glimpse of a buyers market was 10 years ago. While we are not yet in a buyers market for resale, the new segment is ripe. A brand new home with a discounted price with a below market rate can only last so long.
Year Over Year Changes
It is easy to point to the affordability issue and conclude wages have a lot of ground to make up still. Despite the probability of revisions to the home home sales number for August, it was unexpected. While future expectations are encouraging, increased activity curtesy of lower rates, the current index of 37 is more telling. A year ago October the reading was 43, but today rates are better and that overlap has to end sometime. We’re below the 50, as the ‘neutral’ line, which is why incentives are still strong. That’s your edge if you move now.
Oct 2025: 37, with future sales expectations 54 and buyer traffic 25.
Oct 2024: 43, with future sales expectations 57 and traffic 29. [1]
While mortgage rates are considered elevated, they have improved. Payments are improving before you add in builder concessions and buydowns.
30-year fixed average: 6.19% October, 2025,
30-year fixed average 6.54% October 2024.[2]
Today the Fed hosts meeting 9 of 10. One more cut is expected in December. Here is a snapshot of short term rates which help Home Equity Lines and some Adjustable Rate mortgage.
Fed funds
Now: 4.00% to 4.25% after the Sep 17, 2025 cut.
Then: 4.75% to 5.00% after the Sep 18, 2024 cut. [3]
Prime rate
Now: 7.25% (effective Sep 18, 2025).
Then: 8.00% (effective Sep 19, 2024).[4]
A bigger surprise is the supply of new home inventory as reported by the Census. This could be why future confidence is rising.
Latest: 7.4 months of supply in Aug 2025.
For perspective, here is a snapshot of the resale market and inventory time. Buyers have some strength in the market, but no where near the command in the new home segment. The net effect is that with more resale homes on the market, the concentration of new homes have some down a few percentage points. Currently new homes make up 26.8% of the market. [6]
Inventory up 14% year over year with a median marketing time of 33 days
Home supply is 4.6 months [7]
Time to send in the Wolf (Street) and ask pretty please, “Are More Price Cuts Coming?”
Wolf Street has touched on the theme the whole year. Builders are relying on incentives, showing the effective prices slipped more than contract prices. Further, completed home inventory matched the highest level we have seen since August 2009. [8] In speaking with new home sales teams, there are healthy discounts on models and specs, but not cuts across the board. With resale and new home market experiencing higher levels of inventory, there’s plenty room for negotiating.
Buy Now, or Wait and See?
Short answer, new construction is way more buyer friendly. NAHB’s study in October shows 65% of builders using incentives, 38% cutting prices, making the average cut 6%. It’s a wait and see game for builders as rates trickle down, they will not need to buydown rates. Builders are still moving a units despite the headwinds, so I expect the season of giving to end sometime by next year. [9]
Survey says rates matter the most, just ask 78% of all home builders. Today we will see another quarter-point discount from the Fed and the odds are for one more in December. The economy is slowing which should help prices and should encourage more buyers to step up. This is a market where the buyers do not buy price, they buy payment. Hence, the most often asked question this year remains “do you offer a 40 year loan?”
Take the market for what it is, a mix of incentives and price reductions. The affordability factor will increase over time but I would not sleep on how quickly the incentive market will change.
Shop this market, like a boss
Pay attention to the data. Try to stay on top of marketing times and inventory. Pay attention to new communities that have recently opened and the incentives and how you can take advantage of every dollar. Two weeks ago I was at a community that was brand new and they were offering 50% off upgrades and $20k to use towards costs and buydowns. It was a fabulous deal.
Use long term rate locks with float downs. Its built in rate insurance, so if rates hang around or do the unthinkable, you stay protected. But if they trend down, and you can pick up a lower rate for free, it’s the cherry on top. New construction is always a moving target, so confirm your rate lock is beyond your estimated close date. Last, make sure you compare rate quotes apples to apples as some lender collect a deposit that is non-refundable. Others add a premium to the current market rate and cap the float down.
Compare resale to new construction. It’s more than a sticker price conversation. New homes win with their warranty and maintenance costs in the first few years. However, we have noticed lately many of new homes are coming with less lot. Resale tends to be in more mature settings with better schools, access to shopping, and convivences.
Footnotes:
[1] National Association of Home Builders - https://www.nahb.org/news-and-economics/press-releases/2025/10/amid-market-challenges-builder-expectations-rise-in-october
[2] Freddie Mac - https://www.freddiemac.com/pmms/pmms_archives
[3] Federal Reserve - https://www.federalreserve.gov/newsevents/pressreleases/monetary20240918a.htm
[4] Federal Reserve - https://www.federalreserve.gov/aboutthefed/fedexplained/accessible-version.htm
[5] Census - https://w.census.gov/construction/nrs/pdf/newressales_202410.pdf
[6] Business Wire - https://www.businesswire.com/news/home/20251029552422/en/Redfin-Reports-27-of-For-Sale-Homes-Are-Newly-Built-the-Lowest-Share-in-4-Years
[7] Reuters - https://www.reuters.com/business/us-existing-home-sales-rise-seven-month-high-september-2025-10-23
[8] Wolf Street - https://wolfstreet.com/2025/09/24/inventory-of-new-completed-single-family-homes-jumps-to-highest-since-2009-but-sales-of-new-homes-see-outlier-spike-in-the-south-prices-skid-some-thoughts
[9] National Association of Home Builders - https://www.nahb.org/news-and-economics/press-releases/2025/10/amid-market-challenges-builder-expectations-rise-in-october