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With the housing market looking increasingly frail, home builders and real-estate agents are going to new extremes to attract buyers, dangling lavish incentives and slashing prices.
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 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 husband, a home builder, constructed on 20 acres near Crater Lake.
"I'd also negotiate a lower price, too," says Adams, an agent with Re/Max International. "I just want this house off our books."
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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 swimming pools 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.
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 (NAHB). Contract cancellations, meanwhile, have hit nearly 30% for some builders.
Things may not get better for a while. The National Association of Realtors said Wednesday that new-home sales this year were likely to fall 19% from last year, worse than its previous forecast of a 17.7% drop.
Many builders never expected the housing market to fall this far. Now they're struggling with empty land, too few buyers and an inventory of finished homes that have been sitting empty for months -- and some are desperate to free the cash locked up in their real estate by enticing the dwindling number of buyers. The latest survey taken by the NAHB indicates that 56% of builders are now offering incentives, up from about 45% a year ago.
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Asking for the moon
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."Heller says that on houses in the $700,000 range, his clients are scoring multiple concessions totaling as much as $80,000. Generally, that includes some combination of a price reduction, an agreement to pay closing costs and upgraded flooring or appliances -- or a combination of the three.
Builders in the greater Dallas-Fort Worth area also have been struggling to move homes and are using incentives more freely. "They are giving stuff away here," says Kenneth Cox, a real-estate agent with DFW Urban Realty in Dallas.
In suburban Dallas, incentives on single-family homes abound, including price reductions of as much as 20% and free swimming pools. Steve Wall, president of builder Wall Homes, says his company is knocking as much as 18% off the list price for inventory homes in the city's northeast suburbs. For other homes yet to be built, the builder is offering free blinds, a free covered patio and 50% off upgrades, up to $20,000. "It's more competitive than this time last year," Wall says.
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