40% of Home Builders Slash Prices in Desperate Bid to Win Back Buyers

America’s home builders are getting hammered — and the market isn’t cutting them any slack. In July, nearly 40% of residential builders resorted to price cuts, up from just 29% who had implemented discounts four months earlier. The jump in discounts shows how urgently builders are trying to offload inventory as high mortgage rates and record home prices continue to sideline buyers.

• The industry’s desperation is evident in incentive packages that now reach over 13% of home costs — more than double the typical 5-6% rate.
• D.R. HortonDHI
  saw revenues plummet from 6.5% year-over-year in the most recent quarter, while KB Home’sKBH
  building revenues dropped 10%.

Cold feet epidemic: Zillow economists believe there’s been a shift in “bargaining power” from sellers to buyers. Homebuyer commitment issues reached crisis levels with 15.3% of pending purchases falling through in July — the highest cancellation rate for that month in at least eight years. Buyer remorse was the highest in San Antonio, with nearly 23% of home contracts collapsing, followed by Fort Lauderdale at 21.3%. Between shrinking lot sizes and aggressive supplier renegotiations, builders are pulling every lever possible to maintain profitability in an increasingly hostile market environment.