Hi {{first_name | there}},

NAHB released its March HMI numbers yesterday. Builder confidence ticked up one point to 38. Still negative territory. Still a grind.

But the number that caught my attention was this one: 64% of builders are using sales incentives right now. That's the 12th straight month above 60%. And 37% are cutting prices outright, with an average reduction of 6%.

If you're offering incentives to close deals, you're not alone. The question is whether you're using the right ones.

A 6% price cut on a $400,000 home is $24,000 straight off your margin. You don't recover that. And the buyer who got 6% off tells their neighbor, who now expects the same discount on their project. You've reset the market's expectation of what your work costs.

Price cuts also show up in comps on new home sales. Every discounted sale makes it harder for you, and every other builder in your market, to hold pricing on the next deal.

There are better options. Here are four incentives that close deals without wrecking your margins.

This is what the production builders are doing and it's working. A 2-1 buydown on a typical home can cost significantly less than a price cut while dropping the buyer's monthly payment by several hundred dollars in the first year. That feels enormous to a buyer who is running the math on affordability. And it doesn't show up in comps.

Costs vary by loan amount and rate, so talk to your preferred lender this week. Most of them can structure a buydown for you in a day and show you the exact numbers at your price point.

Instead of cutting $20,000 off the price, offer $15,000 in design upgrades. Better countertops, upgraded appliances, built-in shelving, whatever fits the project. The retail value to the buyer is $15,000 but your actual cost on those upgrades is often half to two-thirds of the retail value. You've created a bigger perceived win for the buyer at a lower cost to you than a straight price cut.

Covering $5,000 to $10,000 in closing costs is a direct reduction in what the buyer needs to bring to the table on day one. For first-time buyers especially, the down payment and closing costs combined are the biggest barrier. This is a targeted incentive that solves a specific problem without touching your sale price.

Offer a 2-year maintenance package or an extended warranty on major systems. Your cost is minimal, maybe a few hundred dollars over two years. But the peace of mind it provides to a buyer who is nervous about a major purchase is significant. It also keeps you connected to the client after closing, which feeds your referral pipeline.

The principle behind all four: give the buyer something that feels like a big win at a cost that's lower than a straight price cut. Protect your margins. Keep your comps clean. And stop training the market to expect discounts.

If you're in the 64% right now, take 15 minutes this week to look at what you're offering and ask whether there's a smarter way to structure it. The builders who are going to come out of this cycle in good shape are the ones who held their pricing and got creative with how they closed deals.

Timothy Dahl
[email protected]
Founder, Builder Playbook
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