Incentives to lure home buyers are back

Marketplace Staff Jul 27, 2006

KAI RYSSDAL: The Fed chairman told Congress last week he thinks the housing market is making an orderly decline. And today the numbers proved Ben Bernanke right. Monthly sales figures for new homes came out this morning. Down 3 percent. Prices are holding steady, even up a bit. Still, though, an orderly decline is a decline. So real-estate developers are having to do something they haven’t done in a long time. From KPCC, Tamara Keith reports.


TAMARA KEITH: It’s a baking hot Sacramento Saturday and a couple of dozen parents and kids have gathered in a vacant lot to watch sky divers, with their colorful parachutes, float to earth.

It’s all part of a plan to lure buyers into a set of model homes in the Woodbury Glen development just steps away.

ANNOUNCER: And here he comes, your last diver carrying the Standard Pacific Homes flag.

This event was heavily advertised in the local paper and on the radio. Jackie Shipley is VP of sales and marketing with Standard Pacific Homes, the builder behind this community. There was a time when stunts like this weren’t necessary, but with all the doom and gloom talk about a bursting bubble, Shipley says in recent months buyers have been more apprehensive.

JACKIE SHIPLEY: We haven’t had to try as much I think in the last two to three years. Now we really have to think about our marketing strategy and be smart about it and be creative.

A year ago, there were waiting lists and lotteries just to get a chance to buy a new home in the Sacramento region. Now the tables have turned. Most home builders have standing inventory, completed homes sitting empty. John Schleimer is president of Market Perspectives, a real estate consulting firm.

JOHN SCHLEIMER: The worst situation for a builder is to be caught with standing inventory that’s unsold. The interest clock is ticking and their profit margain dwindles quite quickly when they have large numbers of inventory homes that are unsold.

That’s why in addition to entertainment, free food and gift cards used to entice people to shop, homebuilders are plunking down real money, offering hefty discounts, appliance upgrades, even free swimming pools. And Schleimer says buyers outside of Sacramento are cashing in as well.

SCHLEIMER: They’re seeing incentives now in major marketplaces across America, like Atlanta, certain parts of Florida. You’re seeing those incentives now. The national builders need to move inventory.

Schleimer insists this isn’t a sign of the bubble bursting, more like a slow leak of air, a return to more normal market conditions.

Valerie Condie is director of sales for the California division of Lakemont Homes. She recently launched a promotion offering up to $100,000 off the high-end properties in the Waterstone at Morgan Creek community. She says incentives help some buyers get past their jitters about a volatile market and rising interest rates. And, she reminds folks, those rates could be worse.

VALERIE CONDIE: Ask your parents. They’ll tell you that interest rates at one time were much higher than they are now. So, in the big picture of things, even though we’re not at the 5-1/2 or the 5; 7 percent, 6-1/2 percent is still great interest rates for consumers to come in and buy homes, to get in now.

That may be so, but home shopper Tony Prekash says he sees no reason to rush.TONY PREKASH: Right now buyers have the upper hand. You can say OK, well, you’re giving me 70-grand for upgrades or closing costs or a combination of both, but the other one is giving me 100-grand. I’m going there.He left the Waterstone development last Sunday without signing a contract, though he said he’d be back.

In Sacramento, I’m Tamara Keith for Marketplace.

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