Luring homebuyers with cost-saving offerings has been a lifeline for homebuilders as a way to combat high prices and consumer uncertainty — and according to some of the country’s largest builders, incentives aren’t going anywhere.
In their quarterly earnings calls this week, national builders D.R. Horton, PulteGroup and Taylor Morrison reported the need for sales incentives and predicted increased incentives through the year amid ongoing demand for lower prices. The earnings reports gave detailed snapshots of the companies’ performances, revealing pain points for homebuyers and the broader economy.
“New home demand continues to be impacted by ongoing affordability constraints and cautious consumer sentiment. Where necessary, we have increased incentives to drive traffic and incremental sales,” said D.R. Horton CEO Paul Romanowski on Tuesday.
Romanowski's sentiments were shared by each builder. What’s been keeping new home sales afloat is the offering of price cuts, mortgage rate buydowns or other incentives that make homeowners’ monthly payments lower.
Buyers remain wary of the current mortgage rate, which, for a 30-year fixed-rate mortgage, is 6.75% as of Thursday. Mortgage rate buydowns mean builders can offer lower mortgage rates through partnerships with preferred or in-house lenders, easing a major headache for buyers today. Other incentives include closing cost assistance, free upgrades or other perks such as extended warranties. These incentives are applied to poor-performing markets, not across the board, according to the homebuilders.
"When mortgage rate buydowns were first rolled out, they were able to attract the fence-sitters, but now the buyers that remain are those that have to stretch, and are therefore harder to close," said Brad Hunter, head of the Hunter Housing Economics consulting firm in West Palm Beach, Florida, in an email. "That said, incentives remain a necessity as far as the builders are concerned."
Monthly payment concerns will remain a primary focus for buyers, and new home shoppers now expect concessions, even when builders already have lowered the base price, Hunter noted.
According to the National Association of Home Builders’ July builder survey, 62% of builders reportedly offered sales incentives while 38% cut prices, a 9% increase from April.
“The trend has continued. It’s extremely competitive. We’re seeing more builders jump into pretty heavy financing incentives that maybe weren’t as active two or three months ago,” said Ashton Woods CEO Ken Balogh last week during the builder’s earnings call. “From what we're seeing so far, and through the middle of summer, is certainly no relief in sight. We’ve seen builders get more competitive.”
Here’s what builders said this week about incentives:
DR Horton
The country’s largest builder by volume posted an average closing price of $369,600, down 1% from the prior quarter and 3% year over year.
The declines in cost can be attributed to sales incentives, which Arlington, Texas-based D.R. Horton's leadership said will likely increase through the final quarter of the year. It's also an effort to help buoy the builder's declining net income, which dropped 25.83% year over year.
D.R. Horton sold 93,000 homes in 2024 across 126 markets and 36 states.
In select markets, the builder’s current buydown mortgage rate is 3.99%, and that level is mostly for Federal Housing Administration loans aimed at buyers who might not qualify for traditional financing. The company said its average mortgage rate overall is typically 1-1.5% below current rates.
Homebuilder incentives are typically measured in percentages of a home's sale price. D.R. Horton does not specify its average incentive rate, though it says it's in the high single-digit percentage range.
“We expect our sales incentives to remain elevated and increased further during the fourth quarter, the extent to which will depend on the strength of demand, changes in mortgage interest rates and other market conditions," said Romanowski.
PulteGroup
While many builders have posted declines in average sale prices, PulteGroup, the third-largest homebuilder, posted a 2% increase to $559,000 in the second quarter.
This is due to an increase in active adult community homebuyers, the company said. These 55+ developments typically sell for more than a product aimed at first-time homebuyers.
Still, the builder posted a year-over-year net income decline of 26.13%, displaying the need for buyer-attracting incentives.
Atlanta-based Pulte reported incentives were 8.7%, up from 6.3% a year ago and up from 8% in the previous quarter. The builder sold 31,219 homes last year across 72 markets and 26 states.
All incentive offerings are market-based. Pulte experienced lower demand in Dallas, Boston, Northern and Southern California, and generally in the West and Texas, with demand beginning to soften in the Northeast and Southeast Florida markets. The builder also increased prices across 10% of its developments.
Taylor Morrison
Scottsdale, Arizona-based Taylor Morrison reported 3,340 home sales in the second quarter, up 4% from the same period of 2024. Still, the average price fell 2% to $589,000 and net sales orders dropped 12% to 2,733. At the same time, unlike its counterparts, Taylor Morrison's net income increased 4% year over year.
Taylor Morrison maintained its guidance from the first quarter, estimating 13,000 to 13,500 sales for the full year. It expects an average price for the year at $595,000 to $600,000.
The builder said incentives are likely to increase during the rest of 2025, adding that personalizing the deals to each customer is best for the buyer and the company.
"Sales are all about confidence with the consumer in today's environment," CEO and Chairman Sheryl Palmer said on a conference call Wednesday to discuss earnings. "We do know that buyers want a deal."
Like D.R. Horton, Taylor Morrison does not specify its incentive rates.