New home closing data is a lot less useful today than in past years. Why? The most common incentives offered by builders today- Rate Buydowns and Closing Cost Credits- are not included in closing prices. These incentives ARE significant discounts.

Anyone that has picked up a newspaper in the last 24 months knows home sales activity has been slow. Prices may feel "high" but they have actually fallen dramatically. Five years ago builders offered incentives that equated to 2% to 3% of a homes purchase price. Today, most production builders are offering incentives equating to 10% to 15% of a homes value. Those incentives are effectively a reduction in price.

Incentives are making it tough for homebuilders to make money selling new homes! The most common incentives offered in the Metro Phoenix Area today are rate buydowns and closing cost credits. When coupled together (and they usually are), these incentives cost builders an average of around 11.5% of the price of a home. Additionally, many builders have discounted the price of advertised inventory homes, further reducing profitability!