Builders Are Slashing Prices to Sell Homes in Fast-Cooling US Markets

On the edges of US Sun Belt suburbia, the wait lists for new houses are gone. And homebuilders are doing something they haven’t done in years: slashing prices.

The fastest-rising mortgage rates in decades have cooled demand so abruptly in many hotspots that it took the industry by surprise. Builders that were artificially limiting sales and auctioning houses to the highest bidder now have inventory to move.

In the Austin, Texas, and Nashville, Tennessee, metro areas, for instance, the share of new-construction offerings with price cuts has quadrupled from a year earlier, according to Redfin Corp. They tripled in Phoenix and doubled in the Tampa, Florida, region.

“We are in a different place — the builder can no longer name a price and say, ‘pay it or move along,” said Nicole Freer, a Houston agent who has slashed prices by $2,000 to $20,000 on homes she lists for builders. “They’re telling us: ‘Our managers have allowed us to negotiate again.’”

It’s part of a rapid shift in the US housing market as the Federal Reserve sharply raises interest rates to tame inflation, sending home-loan costs to the highest level since 2008 and straining buyers whose affordability limits were already being tested. Just this week, brokerages Compass Inc. and Redfin said they would slash jobs, while economic data showed housing starts dropped to the lowest level in more than a year and homebuilder sentiment is at a two-year low.