Home builders have an exceptional sales opportunity following the Jan. 22 three-quarters of a percentage point interest rate cut by the Federal Reserve. Mortgage rates are already near historic lows, and the largest rate cut since October 1984 makes buying a new home a not-to-be-missed decision for consumers right now.

Home builders should use the cut to send a critical message to potential buyers: Those who commit to a new home today will get extraordinary value for their dollar.

Whether they choose to add more features or upgrades, or help their budget with lower monthly payments, the power is in their hands to purchase a home that meets their needs.

“Today’s rate cuts by the Federal Reserve had an immediate effect on prime mortgage rates,” said David Seiders, NAHB’s chief economist. “Fixed-rate conventional conforming mortgages now are available around 5.3%, which is extremely low by historical standards.”

Builders can make a positive, immediate impact on their sales by coaching their sales teams to show potential buyers how the rate cuts benefit them.

Demonstrate to potential buyers that a rate cut almost always provides a significantly greater cost savings over the life of the loan than a drop in price. Buyers who wait for prices to go down will most likely end up losing money overall if rates go up even one-half of a percent. Trying to time the market is a dangerous gamble that could end up costing them thousands of dollars.

For example, a buyer who gets a 30-year fixed rate mortgage for $400,000 at 5.3% today will spend $20,520 less overall than someone who got a better price — say $380,000 — but with a rate at 6%.
 

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