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Prices of New Houses Drop Further, Builders Stimulate Sales with Price Cuts, Pulling Demand from Previously Owned Homes

May 24, 2023

by Wolf Richter Wolf Street

That arbitrage is now happening among homebuyers. But regular homeowners wanting to sell haven’t figured it out yet.

Homebuilders, unlike homeowners that want to sell a house, are not emotionally attached to prices. Their business is to build homes and sell them, no matter what interest rates are doing, and they cannot sit there and wait, praying, “and this too shall pass.”

So, unlike many homeowners that are thinking about selling, homebuilders started cutting prices in the fall of 2022, and they used mortgage-rate buydowns and other incentives to stimulate demand for their unsold inventory that had been piling up. And it worked. Cutting prices enough always works.