Five of the nation's biggest publicly traded residential builders this week posted higher home sales for the second quarter, bolstered by the use of incentives even as the industry contends with elevated mortgage rates.

Reporting increased sales and contracts for the 12 weeks ended June 30 were Century Communities, Meritage Homes, Taylor Morrison and NVR. As a result, Century of Greenwood Village, Colorado, and Scottsdale, Arizona-based Meritage raised their full-year guidance for revenue and home sales.

PulteGroup also said sales increased, but its new orders declined in the second quarter. Still, the Atlanta-based builder expects to sell about 31,000 homes this year, up from 28,603 last year.

The earnings reports follow a drop in June of new U.S. single-family homes sales. Nationwide, new homes sales last month totaled a seasonally adjusted 617,000, coming in below analyst expectations and marking the lowest reading since November, according to the U.S. Census Bureau and Department of Housing and Urban Development.

Homebuilding is a fragmented industry so it's entirely possible for new home sales to falter while big builders are doing well, according to Justin Benefield, academic director for Auburn University's Institute for Real Estate Development.

"The top 10 builders are not nearly as much of the market in the homebuilding industry as, say, the top 10 retailers are in retail sales," Benefield told CoStar News. "There are a lot of small-time builders that account for a lot of home sales, and they may be bearing the brunt of what's going on."

Builders generally have been insulated against mortgage rates near 7% by low inventories of existing homes, forcing some buyers to consider new homes. The builders also can boost sales by offering mortgage-rate buy-downs and other incentives.

In a buydown, builders use profits from sales to lower buyers' interest rates, making their monthly payments more affordable. Some buy-downs are for the life of the mortgages, while other buydowns guarantee lower rates only for a set period, such as a year or two.

Large public builders offering incentives to buyers is a near universal practice, but it's not as common among smaller builders, industry observers say.

"Local builders have smaller margins that they're working with," Denver-based housing analyst Tom Hayden said in an interview. "They've got to get the homes sold or they're going to go out of business."

The Federal Reserve has hinted that an interest rate cut is coming this year, but Hayden expects rates of between 5 1/2% to 7% indefinitely.

The interest rate environment will help determine the level of incentives Century gives on future sales, Rob Francescon, co-CEO and president, said on the company's earnings call this week.

"In terms of discounting that we’re doing, it’s still mainly related to interest rate help for our homebuyers as opposed to heavily discounting the home price themselves," he said. "And when we look around at our various markets, that’s pretty much what we’re seeing our competitors doing as well."

Still, Auburn's Benefield said the buy-downs won't be as prevalent as land costs increase for builders, giving them less room to negotiate on home sales.

Other factors in Century's recent success included strong inventory management and a focus on building less-expensive homes, Hayden said. The strategy has helped the homebuilder capture some of the strong demand from first-time homebuyers, he said.

Century's average sales price of a home in the second quarter was $388,800, when the average cost of a U.S. house is $520,000, according to the Federal Reserve Bank of St. Louis.

As for activity involving more-expensive homes, Taylor Morrison said it closed on the sale of 3,200 homes at an average price of $600,000 during the period that ended June 30.

"In the second quarter, our team delivered solid results, highlighted by both our closings volume and home closings gross margin exceeding our expectations," Taylor Morrison Chairman and CEO Sheryl Palmer said in a statement. "Following this strength, we now expect to deliver between 12,600 to 12,800 homes this year at a home closings gross margin around 24%."