U.S. mortgage rates rise near 7%, driving builder incentives

U.S. mortgage rates have risen, with the average 30-year fixed-rate mortgage recently exceeding 6.95%. This shift has impacted the housing market, leading homebuilders to increase buyer incentives to maintain sales.

According to a National Association of Home Builders survey, 66% of builders reported using sales incentives in September, an increase from 63% in August. Additionally, 38% of builders utilized price cuts, with an average reduction of 6%. These incentives often take the form of temporary mortgage rate buydowns, which can significantly lower initial monthly payments, or outright price reductions.

Despite the challenging environment characterized by low refinancing volumes and stretched affordability, some companies are navigating the downturn by gaining market share. Rocket Companies, for instance, reached record market shares in both the purchase-mortgage and refinancing sectors during the second quarter. Other firms, such as Dream Finders Homes, continue to operate using land-light models to manage capital efficiency.