Home builders keep the incentives coming
By Melissa Wirkus
Regular residential home
owners are not the only ones who are having
trouble selling in the slowing housing
market; big home building companies are
feeling the effects as well.
Home builders, who have a surplus of homes
available, with not nearly enough buyers,
are turning to special incentives and
promotions to lure-in buyers.
These incentives include everything from
upgrades on kitchen
appliances to gift cards for house
ware stores.
An October 13, 2006 article by John Spence
of MarketWatch.com, “Home builders
up ante to lure buyers,” looks into
the different incentives, promotions and
discounts that many home builders are
now offering to stand out above the competition.
“Large home builders are dangling
out more incentives to reluctant buyers
as the roof caves in on the U.S. housing
market. To entice customers, companies
are serving up deals that include a free
pool, a fancy kitchen or even a new car.
But real-estate brokers say all buyers
want is a cheaper house.”
“In September about 77% of home
builders were offering some sort of sales
incentive in response to spiking inventories,
compared with 58% a year earlier, says
Gopal Ahluwalia, staff vice president
for research at the National Association
of Home Builders.”
While some home builders
are offering trips and cars, others are
offering help with payment, such as paying
for closing costs. Now, well over more
than half of all home builders are offering
some sort of incentives, and this is because
it costs a lot more to stand out amongst
so many other companies that offer similar
homes.
“Delores Conway, director of the
Casden Real Estate Economics Forecast
at the USC Lusk Center for Real Estate,
said builders in California have gotten
more creative with incentives. Aside from
new cars, some have been offering to pay
to have a stager come to the previous
home to help improve its appearance to
enhance the sale value.”
“‘The good news is most builders
have recognized the market has softened
and they've stopped building,’ she
said. ‘The buyers' expectations
have changed a lot -- they're afraid of
buying at the high point of the market,
so they feel it's to their advantage to
just sit and wait.’”
But most analysts and experts agree that
what are most valuable to potential buyers
are discounts on the actual price of the
home. Many people who are looking for
a new home don’t care about a Palm
Springs weekend getaway or a lease on
a used car.
Buyers want to see the incentive in the
form of a discount on the price of the
house, but many companies are still reluctant
to drop prices and would rather offer
gifts.
“‘They'll give you anything
to sell the home,’ said Edward Maddox,
a realty agent at Keller Williams Realty
Southeast Valley. ‘It's 180 degrees
from last year.’”
“Yet Maddox and some other brokers
said simple price discounts pique buyers'
interest more than gimmicky marketing
incentives such as a free washer or dryer.
‘Most buyers are focused on lowering
their monthly
payments, and a new car doesn't help
with that,’ Maddox said.”
These incentives will only continue, and
probably get even more competitive until
the glut of homes is off the market and
things begin to return to normal.
