I've written about some of the extra incentives sellers in my city are adding to their homes in an effort to get rid of them, but here's another piece that offers even meatier details. This time it's builders who are offering some over-the-top incentives to sell their homes. A few examples:
In Boca Raton, Fla., Gordon Homes is offering to pay two years of property taxes and insurance -- worth as much as $150,000 on houses priced as high as $2.5 million -- for buyers of completed homes at its upscale Azura development. In Richmond, Va., Orleans Homebuilders Inc. is offering "Sizzling Summer Sale Savings" that include as much as $100,000 off the cost of upgrades ranging from granite countertops to a conservatory. And in Medford, Ore., Diane Adams, a real-estate agent, is offering to pay four months of mortgage payments on the $975,000 house she and her home-builder husband constructed on 20 acres near Crater Lake. "I'd also negotiate a lower price, too," says Ms. Adams, an agent with Re/Max International Inc. "I just want this house off our books."
Across the country, the theme is the same: Home builders and home sellers are juicing their efforts to unload single-family homes. Among other things, they are offering buyers cash discounts of as much as 20%, throwing in a pool and agreeing to finish basements, garages and other spaces at a cost of several thousand dollars -- incentives much richer than builders were offering as recently as six months ago, when the downturn didn't look as bleak.
Yep. And the worst may be to come:
Since then, home builders have been hit hard as rising mortgage delinquency rates have made lenders much more reluctant to issue new loans, causing home prices to fall and inventories of unsold homes to rise. In June, new-home sales had fallen more than 40% from their peak two years ago, and more than half a million new houses -- nearly eight months of supply -- sit in inventory, according to the most recent report from the National Association of Home Builders. Contract cancellations, meanwhile, have hit nearly 30% for some builders.
Things may not get better for a while. The National Association of Realtors said yesterday that new home sales this year were likely to fall 19% from last year, worse than its previous forecast of a 17.7% drop.
They then share a few more stats/examples:
The latest survey taken by the National Association of Home Builders indicates that 56% of builders are now offering incentives, up from about 45% a year ago. And those incentives are growing bigger. In California's San Diego County, Chris Heller, a real-estate agent with Keller Williams Realty, says that until about 18 months ago, builders had little reason to offer incentives. Today, he says, "buyers are asking for the moon, and they're often getting it."
Mr. Heller says that on houses in the $700,000 range, his clients are typically scoring multiple concessions totaling as much as $80,000. Generally, that includes a price reduction, an agreement to pay closing costs or upgraded flooring or appliances -- or a combination of all three.
This trend toward more-generous incentives is "likely to intensify," says Mark Zandi, chief economist at Moody's Economy.com, citing a growing inventory of new homes, an oversupply of pre-owned homes on the market and "a glut of homes that are a year or two old that investors bought as rental property that have never been lived in, and those investors are now trying to sell, too."
My general thoughts on this topic:
1. All markets are different. Some (most?) are down, some are even, some are up. There are probably just more that are down and are down bigger that are driving the total numbers.
2. This article nails it on the head when it comes to what's happening in my market. I'm at the point now where I see a house listed for $350,000 and immediately think that the "true" selling price is probably $280,000 or so. I'm not sure if it's sellers over-pricing or just a market in freefall. One property I've been eyeing went on the market for $459,000 (over what I want to pay, but I knew it could come down a lot.) It's currently at $419,900 three months later. I think it can be had for $350,000 or below. Yes, these are wild times.
3. Even in a bad market, houses do sell. We had a neighbor sell his house in four days. There are things you can do to sell your house. For a few of these suggestions, see these links:
There are very few markets that are truly "up" right now, and the few that are look to be headed for a fall soon.
Many of those that appear to be "up" take on that appearance because of the ratio of high-end to low-end houses that are selling. The same house is cheaper (especially when incentives are counted), but those on the low end can't afford to buy with tightening lending practices, so the median home price shifts up even as individual home prices fall. (Read seattlebubble.com/blog for graphs, charts, etc. Pay special attention to the Aug 19 post.)
Posted by: LotharBot | September 05, 2007 at 02:27 PM
The market isn't very good right now, but if you can afford it, now would be a great time to pick up some rental property.
Demand for mortgages is down, which means that demand for rentals is up, also prices and incentives are now more favorable for cash flow.
Best,
James
Posted by: James | September 05, 2007 at 06:09 PM
An upturn in volume precedes an upturn in price so have plenty of patience.
Posted by: Lord | September 05, 2007 at 08:09 PM