Home builders across the country are facing the same challenge: how to hit sales projections in a volatile mortgage environment while protecting margins.
Many builders are responding with larger incentives, aggressive rate buydowns, and blanket promotions across communities. But according to New Home Star's Keith McKinney’s presentation at the Production Builder Executive Club during the International Builders’ Show (IBS), this reactive approach often burns cash without generating sustainable sales momentum.
Instead, McKinney proposes a different model: the Sales-Mortgage Flywheel, a strategic framework that aligns sales operations, mortgage offerings, and buyer psychology to create margin protection, faster sales velocity, and improved affordability.
The sales-mortgage flywheel is a strategy that treats sales and mortgage as interconnected systems rather than separate functions.
A flywheel takes effort to start, but once it gains momentum, it continues spinning with less energy. In homebuilding, the same principle applies:
When these components work together, they generate momentum that drives:
Instead of reacting to sales slowdowns with blanket incentives, builders use precision strategies that compound over time.
Many builders approach incentives using a linear model:
This cycle often results in large incentive spend with inconsistent results.
Builders may offer:
Yet even after increasing incentives, sales pace may still fall short of expectations.
The reason: One lever cannot solve a complex problem.
Instead of a single incentive strategy applied across every community, builders need to evaluate multiple inputs simultaneously, including buyer psychology, mortgage options, and community-specific demand.
One of the biggest challenges in today’s market is the widespread use of blanket incentives across multiple communities. When builders apply the same mortgage incentives everywhere, several problems emerge:
For example:
A mortgage promotion designed to help first-time buyers may be ineffective in a community where the primary buyers are move-up households or pre-retirees. The result is margin leakage without meaningful sales impact. Instead, builders should evaluate incentives community by community and align mortgage solutions with the target consumer profile (TCP) for each neighborhood.
According to McKinney, the sales-mortgage flywheel focuses on three primary business outcomes.
Builders must shift from generous incentives to precision incentives. Instead of offering the largest possible discount, successful builders design targeted mortgage solutions tailored to specific buyers and communities.
This approach helps builders:
Faster decision-making leads to faster sales cycles. Builders can improve velocity by:
When buyers understand financing options earlier in the journey, they gain confidence and move forward more quickly.
Affordability remains one of the biggest barriers to homeownership. However, affordability isn’t just a headline issue; it’s an operational challenge. Builders must combine multiple strategies to improve affordability, including:
When financing is presented clearly, buyers are more likely to move past the hesitation caused by today’s higher interest rates.
A key principle of the flywheel model is mortgage engineering. Rather than creating entirely new financing products, builders can often improve results simply by matching existing mortgage options to the right buyers.
For example:
The mortgage products themselves may already exist. The difference is how they are positioned and presented to buyers.
Artificial intelligence is becoming an important tool for builders looking to improve sales performance. Mortgage lenders hold valuable data about buyer behavior, including:
By analyzing this data with AI tools, builders can uncover insights such as:
For master-planned communities with years of historical data, AI can help identify patterns that reveal new opportunities for sales growth.
Even when mortgage rates improve, buyer confidence may not immediately follow. Many buyers still compare today’s housing costs to pre-pandemic affordability levels. This creates what McKinney describes as “payment shock.”
Even if a new home offers strong long-term value, buyers may hesitate because:
Builders must therefore focus not only on the numbers but also on buyer perception and trust.
To help buyers move forward with confidence, builders should focus on three key elements.
Buyers need a clear understanding of how their mortgage payment will change over time.
Sales teams should be able to explain:
Without clear explanations, buyers may hesitate even when the financing option is favorable.
For many buyers, the mortgage process feels confusing or opaque.
Builders who simplify and clearly explain financing options can:
Transparency transforms mortgage financing from a mystery into a confidence-building tool.
Many buyers today feel uncertain about their financial stability.
Sales teams who work closely with mortgage partners can help buyers understand:
This reassurance can significantly shorten the sales cycle.
Many builders make incentive decisions month to month based on sales results. However, a more effective strategy is to plan incentives proactively. Instead of reacting to slow sales, builders should establish quarterly strategies for each community, similar to how real estate agents price listings.
For example:
This proactive approach creates a structured roadmap for sales performance rather than constant reactive adjustments.
A single tactic cannot solve affordability.
It requires coordination across:
When these elements operate together, they form a system that improves affordability while still protecting builder margins. That system is what McKinney describes as the sales-mortgage flywheel.
Once it gains momentum, it helps builders:
Builders navigating the current housing market should focus on five strategic shifts:
By engineering sales and mortgage together, builders can create a flywheel that delivers margin, velocity, and affordability simultaneously.