Local home builders offer incentives to boost sales

CYPRESS, Calif. — With rising mortgage rates, higher prices, supply chain issues, and changing buyer sentiment, home builders are boosting incentives like they did pre-pandemic to lure prospective buyers amid sluggish home sales.

What You Need To Know

  • New home builders are offering incentives to boost sales amid a changing housing landscape
  • Melia Homes and City Ventures are offering lower mortgage rates than the current rate
  • With home sales dropping, home builders are facing a housing recession 
  • Interest rates continue to go up, impacting a buyer’s affordability

Melia Homes in Cypress offers prospective qualified home buyers as low as a 4.6% 30-year fixed-rate mortgage if the buyer goes with the builder’s preferred lender. 

In Long Beach, City Ventures offers qualified home buyers a 10-year 3.75% adjustable rate mortgage.

The promotions are considerable, given the current 30-year mortgage rate is 5.9% as of Monday.

Melia Homes and City Ventures officials did not return a request to comment.

But many experts say the housing landscape, especially for builders, is changing. 

“Incentives are starting to become the norm,” said Eric A. Nelson, president of the Orange County Chapter of the Building Industry Association and vice president of community development for TruMark Homes, in an interview with Spectrum News. “Consumers need a good reason to buy. Incentives come in all different forms. They can go with a builder’s preferred lender and lock down the rate they want, get the home they want in a certain location, upgrades, anything to soften the landing for home buyers.”  

Last week, the National Association of Home Builders said the U.S. is amidst a housing recession. 

NAHB officials said July’s new home sales fell nearly 13%, the lowest level since January 2016.

Local home builders offer incentives to boost sales

Melia Homes Belmont community in Cypress, Calif. (Spectrum News/ Joseph Pimentel)

After the early part of the coronavirus pandemic accelerated the demand for housing due to low-interest rates and remote work, mortgage rates have steadily risen. 

The Federal Reserve began aggressively increasing interest rates to curb historically high inflation, and banks have responded by raising mortgage rates.  

The rising rates and higher construction costs are pushing many buyers, especially first-time home buyers, out of the market, said Jerry Konter, chairman of the National Association of Home Builders. 

The high rates are impacting buyers’ affordability.

“The sharp drop in new home sales is another clear indicator that housing is in a recession,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis, in a news release. “The combination of higher prices and increased interest rates are generating a notable slowing of the housing market.”

Pre-pandemic, it was customary for builders to offer incentives for buyers and real estate agents referrals or commissions. 

Many builders offered to help with closing costs, upgrade options, appliances, etc. 

Buyer agents steering their clients to a builder’s new home community could receive a 3% to 6% referral fee or commission, said Edwin Baloloy, a real estate salesperson at Newport Beach-based Residential Agent.

But at the early part of the pandemic, when housing was in such great demand, home builders ditched those incentives. Homes were flying off the shelves. There was no need to offer such things.

However, months later, the tables have turned.

Baloloy said he knows of a builder that offered to drop the price of a condominium by $80,000 when the prospective buyer backed out. 


“Normally, they don’t do that; it pisses off their other buyers,” Baloloy said. Baloloy didn’t disclose the builder’s name since he has a working relationship with them. “They might be seeing something in the market we are not seeing.”

Nelson, the president of the BIA OC, said the current housing climate and high-interest rates exacerbate the region’s housing problems. Orange County and Los Angeles already face a massive housing shortage. 

New home builders build homes in phases, not all at once, so when sales slow down, it impacts how much they can produce later, Nelson said.

“What ends up happening is that the phases start later, driving up the price,” said Nelson. “Builders would love to build more but are constrained by the reality of rising interest rates, supply chain issues, and labor.”  

Still, the current climate of high-interest rates and higher prices won’t stop home builders from building. 

“Orange County still has a strong housing market,” said Nelson. “That’s not going to stop builders from responding to the market. Housing developers need certainty to build. None of us want to build less. We want to build more, but we must do it cautiously.”