Homebuyers struggling to score a house right now have a glimmer of hope

Homebuyers struggling to score a house right now have a glimmer of hope
Erik Heuser, the COO of homebuilder Taylor Morrison, said builders have more tools than banks when it comes to helping people buy homes.jhorrocks
  • Taylor Morrison's COO said builders can often offer homebuyers better rates on a newly built house.
  • Erik Heuser said builders can offer closing cost assistance, rate buydowns, and extended-lock rates.

We all know it's one of the most competitive housing markets in years.

High mortgage rates, home prices teetering near an all-time high, and historically low inventory are keeping many buyers — and sellers — on the sidelines.

But Erik Heuser, chief operating officer of homebuilder Taylor Morrison, told Business Insider that more and more hopeful buyers are looking at newly built homes. He said, typically, new homes would account for around 12% to 13% of total homes sold across the US, but today they make up more than 25%. The larger share of new homes on the market means paying a mortgage rate around 7% isn't the only way into a home.

Heuser explained that folks who choose to finance their home purchase through their bank are going to get whatever that bank's rate is. But "we as homebuilders are able to offer, really it's four tools": closing cost assistance; a temporary rate buydown, which is a lower initial payment; a permanent rate buydown, which is a higher upfront cost but provides a lower payment for the duration of the loan; and extended-lock rates for homes that are under construction, where the homebuilder is "able to provide security on what the rate is," Heuser said.

In short, buying a new home may be the most affordable way into homeownership these days.


During its third-quarter earnings call, Taylor Morrison explained that it's attracting "well-qualified consumers even among our first-time homebuyers" and 88% of its buyers are using its financing assistance. "It's contributing to a lot of sales success," Heuser told Insider.

Homebuilders like Taylor Morrison are able to offer lower mortgage rates than banks

He said Taylor Morrison is trying to understand the barriers to homeownership, whether it's the down payment, the monthly payment, or the overall sales price, and then using "the right arrow in the quiver to help them get into a house."

As Business Insider previously reported, would-be buyers may have more luck securing a lower rate if they buy a new-construction home. In fact, there's even the possibility of securing a rate as low as 4.8% when buying a new home.

The typical rate right now is above 7%, according to Freddie Mac.

"Finance sells homes, and a house doesn't become a home unless we have the ability to get that customer to the closing table, and they can qualify and confidently make their mortgage payments," Tawn Kelley, mortgage industry veteran and the president of financial services at Taylor Morrison, previously told Insider.


Meeting buyers where they're looking — in the South

Nearly a third of homes on the market in the second quarter were new builds, up from just 17% in the same quarter in 2019, according to Redfin.

It's not that homebuilders are constructing more single-family homes now. Would-be sellers are effectively trapped in their homes: Existing homeowners see steep mortgage rates and a dearth of homes for sale, and worry about finding a new place to live. So they're holding onto their existing properties, pushing up the share of new homes on the market.

New homes are more prevalent in the South, according to Redfin, an area that buyers in search of affordability often head to. Taylor Morrison's supply is there to meet them.

Heuser explained most of Taylor Morrison's newly constructed homes are in Florida, Texas, North Carolina, and Georgia. He said Arizona, Washington, and Nevada are also states they're focused on building in.

"I think new [homes] will continue to garner a lot of share and interest because, again, we build in core locations," he said.