Higher mortgage rates don't just affect buyers. They can change what it takes to sell your house, too.

That's because today's buyers are paying close attention to affordability. And when rates rise, even a relatively small change can make a noticeable difference in their monthly payment. So, they're looking for ways to make the numbers work. And in some markets, new construction is giving them exactly that.

If you're planning to sell, that doesn't mean you can't compete. But it does mean you need to understand what builders are doing to win over buyers – and what options you have, too.

Builders Are Competing on the Monthly Payment

New construction has something interesting going for it right now. While existing-home sales (homes that have previously been lived in) continue to struggle under the weight of higher mortgage rates, new-home sales are holding up a bit better.

In a recent interview, Logan Mohtashami, Chief Economist at HousingWire explains new-home sales are at an 8-month high and are now running around 2019 levels. On the flip side, existing home sales are lagging behind and fall about 1 million home sales short of 2019 levels.

One big reason builders have been able to navigate higher rates differently is incentives. According to Realtor.com, nearly 1 in 5 (18.8%) newly built homes come with some kind of buyer incentive advertised up front:

The most common may surprise you. As the graph shows, many builders are offering reduced rates, sometimes through something called a mortgage rate buydown.

It's essentially where they pay upfront costs to help buyers get a lower rate, and by extension, a lower monthly payment. It has obvious draws for buyers. For homebuilders, it helps them get their houses sold. So, a lot of builders see it as a win-win. That's why reduced rates are a part of 13.8% of new home listings.

In some cases, builders are offering rates below 6%, maybe even far below 6%. And that can help buyers shave hundreds off their monthly payment. That's a big difference to a buyer who are feeling the pinch right now.

So, How Can Sellers Like You Compete?

First, don't assume a mortgage rate buydown is something only a builder can offer. Sellers can contribute toward a buyer's rate buydown too, depending on the loan and transaction. Does that mean you should offer one? Or that you have to if you want to compete? Not necessarily.

A buydown is just one possible lever. Depending on your market and the buyer, it may make more sense to negotiate on price, contribute toward your buyer's closing costs, make repairs, or make sure your house stands out in ways a new build can't. That's why working with an agent who knows your local competition matters. Joel Berner, Senior Economist at Realtor.com, says:

"Sellers of existing homes are facing a lot of competition from the new-home space. . . so sellers should highlight the local amenities of their neighborhoods in contrast to the more suburban or exurban communities where many new homes are built."

A great agent will do this naturally anyways. Knowing what makes your house different and showcasing that in your listing can help your house stand out. And remember, being open to making a few compromises or throwing in some concessions can make a bigger difference for buyers than you may think.

Today's Market Rewards Sellers Who Adapt

Builders have also been quicker to adjust their prices based on what buyers can actually afford and where demand is. That's putting pressure on the resale market in some areas. Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), explains:

". . . existing homeowners now have to do the price discovery that builders have been doing since 2022."

That's an important message if you're hoping to sell.

You don't automatically need to slash your price or offer a big concession. But you do need to price and market your house based on what buyers can pay today – not what sellers could get a few years ago.

And remember, this varies tremendously by location. New construction represents a much bigger share of the competition in some markets than others, and builder incentives aren't equally common everywhere. So, lean on an agent to see how big of a factor builders are in your area.

Bottom Line

Higher mortgage rates are making buyers more cost-conscious. Builders know that, and many are responding with reduced rate, closing-cost help, price reductions, and other incentives.

If you're thinking about selling, let's look at what buyers are getting from other homes in our area – including new construction – and make sure your house is positioned to compete.