A Southlake home builder is cutting asking prices and buying down mortgage points in an effort to stay profitable.
As interest rates continue to rise and labor shortages drive up the cost of construction, Kindred Homes is slashing prices and offering incentives to buyers, the San Antonio Business Journal reported.
“We were getting tons of cancellations because people couldn’t afford the house,” Kindred CMO Carol Horton told the outlet. “We reduced our base pricing significantly, but we didn’t reduce it fast enough to stay ahead of the downturn.”
The builder began offering buyers $15,000 toward the interest or closing costs last year, and the offer increased to $25,000 in December.
On top of that, the asking price of homes was cut by up to 10 percent.
“The margins are not wide in production housing — you’re making your money off quantity. When everything slows down because you can’t build, you get crushed on your margins,” Horton told the outlet. “Some buyers were asking for discounts of $100,000 for a $500,000 home — we just can’t do that.”
Kindred didn’t increase asking prices fast enough to keep up with the rising cost of lumber, which quadrupled over the pandemic, Horton said.
Rising construction costs have affected smaller builders more than larger ones, due to competition in the labor market, Horton said.
“We start four to five homes at a time in a community,” Horton told the outlet. “Where your Lennars and D.R. Hortons are starting 20.”
Things seem to be looking up for Kindred, as the company sold almost 20 homes in the past six weeks, Horton said.
“The existing home market is still thin. There are more buyers than there are houses,” she told the outlet.
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Dallas
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