The new game in the new home business is called, "What's Your Incentive?"
That's typically the first thing buyers ask today when they walk into a new home sales office where builders are using lures instead of price reductions to move an over supply of homes.
In July the National Association of Home Builders (NAHB) said new single-family home sales dipped 4.3 percent in one month, 14.2 percent compared to the first seven months of 2005 and a whopping 21.6 percent from the record levels set in July 2005.
"Builders have been offering sales incentives and slowing their production as demand cools and inventories rise, and our surveys suggest that the downward correction in sales from last year's record pace still is underway," said NAHB president David Pressly, a home builder from Statesville, N.C.
David Seiders, chief economist for NAHB says 75 percent of the nation's builders and developers are offering incentives, as Pressly blamed the downturn on high prices and investors and speculators abandoning the market. Higher interest rates are also a factor.
Housing's current plight and its role as an economic cornerstone was evident the week ending September 8, when stocks fell for at least two consecutive days after Beazer Homes USA, Hovnanian Enterprises and KB Home warned of growing cancellations and spikes in the supply.
That same week, a mortgage rate breather with six consecutive weeks of rate declines appeared over as Bankrate.Com first and then Fannie Mae reported rates were up albeit slightly.
This round of new home incentives include the usual mundane kitchen and appliance upgrades and prepaid closing costs, but more and more builders are using unusual come-ons to lure buyers. Most incentives are showing up in the coastal and high-priced markets where the biggest booms are giving way to the largest busts.
"For the condo buyers, we're seeing everything from the first year's mortgage payment and first year's HOA dues paid to discounts off of prices to upgraded appliances, cabinetry, and woodwork," Jack McCabe, president of McCabe Research and Consulting, a real estate consulting firm in Deerfield, FL told Hanley Woods' Multifamily Executive publication.
Here's a look at some of the come ons.
- Clarum Homes, looking to speed the sale of the last few homes in its Pajaro Vista development in Watsonville, CA, parked fuel-efficient hybrid Toyota Priuses in the driveways to keep with the development's near zero energy home theme in the 55-and-older community.
- San Diego's condo development, Atria, at a prime downtown address, with units starting at $300,000, was giving away big screen plasma TVs and $5,000 renovation gift certificates, even though condo renovations are subject to the approval of the homeowners association.
- Pulte Homes was sweetening the deal for Aubrey Glen's attached townhomes in Santee, CA, with a free laptop computer, plantation shutters and a plasma television.
- Pulte also announced a $99,000 Giveaway and Getaway promotion for select homes in select communities in Northern California where the $99,000 could be used to roll back the price, buy options and obtain 100 percent financing. A free pool and a free vacation were also included in some of the deals.
- In Las Vegas, register with Diann and Glen Tonnesen of Prudential Americana Realtors and you'll get up to 1 percent of the sales price rebated through selected builders -- in addition to builders' own discounted options, prepaid closing costs and other incentives.
- Also in Las Vegas, select floorplans in Toll Bros. Hidden Canyon Estates came with a free pool to help deck out estate-sized homes with 3,473 to 3,895 square feet of living space priced from the mid-$600,000s.
- Minutes from the Vegas Strip, American Invsco's Meridian investment condos come with two years of paid taxes and homeowner association dues, valued at nearly $30,000.
