Growing inventory of existing homes for sale is increasing competition for homebuilders as traditional sellers cut prices to attract buyers. [5, 7] Lennar and KB Home have acknowledged tougher market conditions, saying they must compete directly with the resale market for a shrinking pool of buyers. [5, 7, 15]
Builders are stepping up sales incentives, with 66% now offering them. [3] Direct price cuts average 6%. [1, 3] Builders also offer mortgage-rate buydowns to improve affordability. [1, 3]
These costly measures help drive sales but erode profit margins. Lennar's incentives reportedly reach 12% of a home's value. [15, 18]