Margins fell at all seven builders we tracked, with incentives near 11% to 12%

Builders that reported this fall called affordability their main constraint, but few put a number on what they spend to close a sale ^[1][6]. Lennar said it carried about 12.0% in incentives, and Green Brick said incentives on new orders were “elevated at 11%” ^[1][7].

Across the industry, 65% of builders used sales incentives in October and 43% cut prices, according to NAHB ^[9].

Every builder we tracked earned a lower gross margin than a year ago

Green Brick still had the highest margin at 28.0%, but it also lost the most ground, 4.1 points ^[7]. LGI gave up the least, 1.3 points, to 20.2% ^[6].

Green Brick and Century also posted the deepest average price declines, 12.1% and 10.2% ^[7][4]. KB Home’s average price barely moved, and its margin still fell 1.7 points ^[2].

Rate buydowns show up in the mortgage numbers

Century’s pipeline of locked loans carried a weighted average rate of about 4.9% at Sept. 30 ^[5], while Freddie Mac’s 30-year average was 7.24% for the week of Oct. 29 ^[10]. Meritage named rate buy-downs as a reason its average price fell, and Dream Finders reported higher costs on its forward commitment program as rates rose ^[3][8].

NAHB’s average price cut has held at 6% for seven straight months, and at least 60% of builders have used incentives for 19 straight months ^[9].

How to use this

For buyers of new homes

1. Ask each builder to state its incentive in dollars. At Green Brick’s 11% and its $446,700 average price, we calculate about $49,100 ^[7], and that figure lets you compare offers from builders that describe incentives differently.
2. Compare a price cut with a rate buydown on the monthly payment. On a $400,000 home with 10% down, we calculate the NAHB average cut of 6% ^[9] lowers the payment at 7.24% ^[10] to about $2,306 from $2,453, while a buydown to 6.24% at full price brings it to about $2,214.
3. Ask whether the incentive requires the builder’s lender, and get the rate, points and lock period in writing. The builders we tracked describe incentives in at least four different ways ^[1][7][8], so a written offer is the cleanest comparison.

For land and lot sellers

1. Ask for a price floor or a minimum quarterly takedown in any option you sign with a builder whose prices are falling. Green Brick’s average delivered price fell 12.1% ^[7] and Century’s 10.2% ^[4], and either could press to reprice lots if sales slow further.

For investors and lenders

1. Ask investor relations for incentives as a share of revenue when a builder does not report it. KB Home and LGI gave no figure ^[2][6], yet KB’s margin fell 1.7 points and LGI’s 1.3 ^[2][6].
2. Watch average price next to margin. Century’s price fell 10.2% and its margin 2.9 points ^[4], while Lennar’s price fell 3% and its margin 1.7 points ^[1].