Where Can You Get Some of the Best Deals on Homes Right Now? The New Construction Market.

With mortgage rates hovering around 6.5% and home-price appreciation slowing, there are more opportunities in the market today for wannabe home buyers willing to jump off the fence. Some of the best opportunities may be for those in the market for new construction.

Late last year, Susan Narta, 66, was looking for a new home in the greater Nashville, Tenn., area to be closer to her grandchildren. She fell in love with a 4,100-square-foot Craftsman cottage-style home listed for $2.3 million. Her agent had prior experience with the builder and knew he wouldn’t budge on price. So instead of making an offer at a discounted price, she tried a different strategy to get the best deal.

“I asked for some additional options I really wanted,” she said. “I asked for an electronic gate, extra fencing, a screened-in porch and a gas grill.” The builder agreed, and repainted the green dining room to Ms. Narta’s preferred blue and added bookshelves in the study.

Ms. Narta estimates that the builder’s cost for these extras was about $30,000. She closed on the home in January at the full asking price.

Builders are facing a confluence of challenges today, from high construction costs to rising interest rates and buyer concerns about job security and inflation. According to the National Association of Home Builders, sales of newly built single-family homes in December 2022 increased by 2.3% compared with the prior month’s sales, due largely to builder incentives and declining mortgage rates. However, sales were down 16.4% compared with December 2021.

To stimulate sales, 57% of builders offered some type of incentive in February 2023, from mortgage interest-rate buydowns to closing-cost credits to free upgrades and options, while 31% reduced home prices, according to the NAHB. That means that deals are available for savvy buyers who know what to look for and what to ask, particularly those willing to pay cash or close quickly.

“We offer incentives, but they vary by both market and community,” said Karl Mistry, executive vice president of Toll Brothers, a luxury home builder in Fort Washington, Pa. “The incentives are targeted to what specific customers are looking for.”

Buyers concerned with interest rates, for example, can take advantage of interest-rate reductions and rate locks of up to 165 days if they use Toll Brothers Mortgage Co., Mr. Mistry said. Those paying cash often prefer a price reduction or free or upgraded structural options or design selections.

Other builders are less willing to discount the asking price of a new home. “We don’t want to hurt our previous buyers’ property values,” said Marcie DePlaza, chief operating officer of GL Homes in Sunrise, Fla., a builder of family and 55+ homes in Florida.

The best deals are reserved for buyers purchasing inventory homes, also referred to as spec homes, early-delivery homes or move-in-ready homes. These are houses under construction that haven’t been sold yet. The closer a home is to completion, the better the deal, as builders are anxious to cut their carrying costs, which include utilities, lawn maintenance, homeowners association fees, taxes, insurance and interest on the builder’s construction mortgage.

“The carrying costs can be significant, so once a home has received its certificate of occupancy, builders typically want to get it closed as quickly as possible,” Ms. DePlaza said. “The best deals are on inventory homes. It’s a great opportunity for buyers.”

Builders of soon-to-be-completed homes are also cognizant of the fact that the value of those homes often declines the longer they sit on the market. “Wear and tear happens,” said Lesley Deutch, managing principal for John Burns Real Estate Consulting.

Here are some things new-home buyers should consider if they are looking for the best deal:

Just say no. Be prepared to walk away if the builder won’t reduce the price or offer any concessions, particularly if you’re interested in a quick move-in. This may be the best strategy from an economic perspective. A recent report by researchers at Florida Atlantic University and Florida International University found that despite the recent downturn, many housing markets around the nation remain overvalued and due for a price correction. The Atlanta metro was the most-overvalued market in January 2023, with buyers paying 51.16% more than they should for housing, according to the report, but the researchers found that metros such as Cape Coral, Fla., Charlotte, N.C., and Memphis, Tenn., were also overvalued.

Lock in the best rate. According to John Burns Real Estate Consulting, 75% of home builders surveyed in December confirmed they were buying down mortgage rates, or paying points—prepaid interest—to the buyer’s lender to reduce the rate, to make payments more affordable. Some were buying down the full 30-year term, while others were temporarily reducing the rate for the first two years of the mortgage. These buydowns lower a buyer’s monthly mortgage payment and can therefore increase their purchasing power. Bear in mind, however, that Fannie Mae and Freddie Mac limit buydowns for loans they purchase on the secondary market. Be sure to check with your lender to ensure that any seller incentives won’t adversely affect your ability to qualify.

Negotiate. “Consumers need to realize they have some power today,” said Ali Wolf, chief economist for Zonda, a housing data and consulting firm. “Not every home is selling within a day and above asking price like we saw for the past few years.” To exercise that power effectively, bone up on the local market, or use a real-estate agent familiar with concessions builders have offered previous buyers. “Looking at closed sales prices is not going to tell a buyer the back story of what was in the deal beside the final price, so buyers won’t know what to ask for,” said Ami Kase, an affiliate broker with Zeitlin Sotheby’s International Realty in Franklin, Tenn. Shop around, and work with a builder willing to give concessions you actually need. “The best incentives are personal to each buyer,” said Mr. Mistry of Toll. “That’s why we give our sales consultants tremendous flexibility.”