How Builders Are Winning the Market with Mortgage Rate Buydowns

Over the past few years, new home builders in Maricopa County have held their ground better than the resale market by leaning heavily on mortgage rate buydowns. After 30-year mortgage rates spiked from 3.9% to over 7% in 2022, builders began subsidizing rates to ease monthly payments for buyers, a powerful incentive individual sellers couldn’t match. As a result, the market share for new homes rose sharply, peaking in March 2024 at 23.6%. Though this edge is beginning to fade in 2025, builders continue to offer incentives that keep them competitive without slashing prices.

A key tool in this strategy has been Forward Price Commitments (FPCs), which allow builders to lock in bulk mortgage funds at favorable rates and advertise set financing terms regardless of the buyer’s credit. Unlike traditional buydowns negotiated on a per-loan basis, FPCs offer large builders predictability and scale benefits not available to smaller firms without access to significant upfront capital. When builders use FPCs to cut interest rates by even 1%, they essentially offer the equivalent of a 10% home discount without adjusting the recorded sale price.

That’s where the data gets murky. Because counties record the top-line contract price, not the financial concessions that reduce the buyer’s true cost, official home price stats for new builds are inflated. The real values are lower than they appear, especially among larger builders using aggressive FPC strategies to juice demand. This discrepancy is warping price trends and making it harder for appraisers to get accurate comps, particularly in buyer’s markets where concessions are at record levels.

Buyers should also approach these deals with caution. While a rate buydown can deliver monthly savings, those same buyers could find themselves upside down if they need to sell in the short term. Without the same builder-backed concessions, a resale may not support the inflated original loan amount. In short, FPCs have helped large builders win market share, but they’ve also distorted pricing signals and introduced risk to less-established homeowners who may not stay in place long enough to build equity.

“Someone is sitting in the shade today because someone planted a tree a long time ago.”
-Warren Buffett

Have a great week, everyone!