Affordability & the Buy Decision: Increasing Sales with Financing & Education

In the ever-evolving world of new home sales, affordability remains the central issue for most homebuyers. Despite the welcomed decline in mortgage rates in Q4-2023, it wasn’t enough to fully address the affordability concerns plaguing the housing market. The combination of higher mortgage rates, escalating home prices, and rising inflation rates over the past 24 months has significantly impacted buyer cash flow and housing affordability. 

Let’s examine some key statistics from the last 24 months: 

1. Principal and interest payments on the same loan amount have surged by over 50%. 
2. Home price appreciation has soared by more than 16%. 
3. The Consumer Price Index (CPI), representing inflation, has increased by over 10%. 
4. Wage growth, the only offset factor, grew by 11%. 

For potential homebuyers, housing affordability remains the primary obstacle to achieving homeownership. This challenge will likely persist for the next few years. 

For new home builders and their sales teams, this situation necessitates the implementation of effective financing incentives to increase purchasing power and lower qualification hurdles. However, not all financing incentives are created equal, and it’s crucial to understand the most significant challenges when crafting them. 

Challenges Faced by Builders and Sales Teams with Financing:  

1. Engaging Buyers with Financing Incentives:

    Financing incentives must align with their financing preferences and needs to attract buyers. These incentives should also have a clear and easily understood value proposition marketed across all channels, including your website, social media, and CRM/email. In today’s digital age, buyers are online, and your incentives should be too. A best practice is to use videos on your website and social media platforms to explain the value of your financing incentives, making it easier for potential buyers to grasp their benefits.

2. Educating Your Sales Teams:

    Equally crucial to crafting the right financing incentives is ensuring that your onsite and online sales teams are well-educated on communicating with buyers about financing. They should be able to:

• • Clearly articulate the value of the incentive. 
  • Answer basic financing questions. 
  • Use the incentive to address common objections, such as “Why buy now?” or “I’m waiting for mortgage rates to come down” or “Rent versus buy.” 
  • Seamlessly introduce the lender into the conversation in real time.

In Summary: 

Affordability continues to be the primary concern for homebuyers. And new home builders must address this challenge through effective financing incentives and education for their sales teams. By aligning incentives with buyers’ financing preferences, communicating their value, and leveraging digital channels, you can increase sales and help more buyers achieve their homeownership dreams. 

About the Author:  

Anthony Grasst is Vice President of CMG Home Loans‘ National Builder Division. Anthony is a seasoned professional with over 20 years of experience in new home financing. With an extensive understanding of buyer financing preferences, he leverages his expertise to provide strategic insights, innovative sales concepts, comprehensive training, and market intelligence to numerous builders nationwide.