Freebies Galore! Home Builder's Incentives
Whenver I hear anyone say home prices are holding up up, I have to laugh. That's like saying the NY Knicks are undefeated (except for their losses).
From CNN Money over the weekend comes this:
David Seiders, chief economist for the National Association of Home Builders says 75 percent of the nation's builders and developers are offering incentives.
Those incentives range widely. "Developers will upgrade appliances, put in a Garland range or a Sub-Zero refrigerator," says Diane Saatchi, a vice president with the Corcoran Group who specializes in Hamptons properties...
The Associated Press reported last week that a new San Diego condo development, Atria, was giving away plasma TVs and $5,000 home renovation gift certificates. Other popular options include fancy kitchen cabinets, granite countertops and marble baths.
Some buyers, however, may just want money - and those deals abound. "Price cuts are averaging 5 percent to 6 percent," Seiders says, "and 30 percent of all the large builders have cut prices in at least some of their developments by 10 percent or more."
So while Home prices may look the same, the net to the builder has changed dramatically -- as the freebies listed below make clear . . .
NEW HOME INCENTIVES
BUILDER SUBDIVISION INCENTIVES Southwest Homes Ansedonia Up to $20,000 incentives on last remaining homes Meritage Yellowstone 5 percent co-op on standing inventory Ryland Belford $20,000 toward design center, special financing DR Horton Twilight 3 percent toward closing costs with builder lender Pardee Springdale $5,000 closing cost credit with builder lender Avante Pecos Park $25,000 toward closing cost or upgrades with lender Kimball Hill Capella Free membership to Henderson recreation center Lennar Eagle Canyon Special buyer incentives and commissions American Invsco Meridian HOA and taxes paid for two years Toll Brothers Hidden Canyon Swimming pool included with some plans Warmington Esplanade Metro Extra $5,000 incentive on Plan A Innovative Mesa Verde $2,000 Visa gift card, six months HOA American West Royal Highlands $15,000 to $25,000 co-op on list price Pulte Silverstone Ranch Golf membership included
Move.com offers a list of homes in Duncan, MI with incentives ranging from $6,000 to $25,000. Incentives as robust as $20k on $194, and $25k off homes as low as $294k home -- a healthy 10% discount.
>
UPDATE: September 11, 2006 7:41pm
Alex points out in comments that Calculated Risk is highlighting a Pulte Homes $99,000 give away on homes priced from $300K+ to $700K+.
>
Source:
Appliances, upgrades, landscaping -- it's all 'free'
Builders turn to cornucopia of incentives to help keep valley's home inventory moving
HUBBLE SMITH
Las Vegas Review-Journal, Sep. 10, 2006
http://www.reviewjournal.com/lvrj_home/2006/Sep-10-Sun-2006/business/9085811.html
Freebies for home buyers
Home sellers are trying to find creative ways to get buyers to sign on the dotted line.
Les Christie
CNNMoney.com, August 25 2006: 10:13 AM EDT
http://money.cnn.com/2006/08/24/real_estate/inventive_incentives/
Monday, September 11, 2006 | 12:07 PM | Permalink
| Comments (35)
add to de.li.cious | 
digg this! | 
add to technorati | 
email this post
Comments
Hmmm, coming soon to a town near you: $400,000 studio condo with $200,000 in incentives. But prices aren't dropping. Hmmmm.
I thought lenders were supposed to keep incentives under 3%. Pay no attention to the mold behind the curtain.
Posted by: KirkH | Sep 11, 2006 12:43:26 PM
I saw an interesting one on the weekend for an existing home, $5,000 bonus from the seller to the buyer's agent. Clever!
Posted by: TT | Sep 11, 2006 12:47:27 PM
hell a move JOE is putting on, up five bucks
Posted by: rob | Sep 11, 2006 1:24:15 PM
KirkH--you're not so far off. Here's a 99K incentive on homes starting as low as 300K:
http://calculatedrisk.blogspot.com/2006/09/another-homebuilder-giveaway.html
And here's an offer of ***40%*** off mortgage payments.
http://calculatedrisk.blogspot.com/2006/09/homebuilders-lower-forecasts.html
What did my realtor say about housing prices never falling? Oh, never mind.
(links courtesy of RGE)
Posted by: DN | Sep 11, 2006 1:39:30 PM
The home markets just about everywhere in North America have taken a dive. Not that this should suprise anyone. There have been people calling out the warning signs for at least a year or more now. It's called a bubble. These incentives are adding fuel to an already dangerous fire.
Posted by: MyFinanceForum.com | Sep 11, 2006 1:41:40 PM
Kirk: This has been going on for quite a while. Builders are offering the same incentives to buyers agents, in some cases you can attain a commission of up to 20% for the 5th house you sell in a devlopment. It's a gradual scale. This is happening all over the place in the industry.... There's a whole lot of desperation going on and everyone is trying to keep a straight face. It's really getting ugly out there... The fact is that we are still in the "Denial" stage. I think that we are going to skip through the "Anger, Bargaining and Depression" and get to "Acceptance" fairly quickly...
Posted by: albiegf13 | Sep 11, 2006 1:54:07 PM
I live in small community in MI and it is obviously a buyers market. I can think of 4 houses in close walking distance that have been for sale for awhile. Not pretty.
Posted by: alexd | Sep 11, 2006 2:18:28 PM
Has the data always been manipulated like this? When I hear and read "housing prices have never fallen year-to-year nationwide since the depression", were prices in past slowdowns manipulated like current data?
Obviously, bad data is an impediment to good markets.
Posted by: kevin_r | Sep 11, 2006 2:30:20 PM
People will wise up when they realize they're paying 30 years of interest + taxes on gardening expenses. Low prices are going to win out eventually. It's certainly interesting in the mean time though.
Posted by: KirkH | Sep 11, 2006 2:43:54 PM
Incentives like a plasma TV should read - "Free Bonus: 30 Yr Mortgage on a Plasma TV!!!"
No thanks. Give me a big cash discount please.
Posted by: Michael C. | Sep 11, 2006 2:51:26 PM
Anyone have a sense of what's happening with rental vacancies and pricing? You'd think that with the softening of sales, there would be increased demand for rentals, and stronger pricing. OTOH, are specs and flippers renting their stale inventory?
Posted by: Estragon | Sep 11, 2006 2:54:26 PM
Louisiana residents are in quite a different situation. The local economy continues to push forward, being fed from local oil companies' $$$ supported by exploration stemming from high oil prices. Those in the right places are making good money, everyone else is screwed. Thanks to Katrina we saw home prices skyrocket as the influx of New Orleans refugees came pooring into town....tack this on to the afforementioned oil boom and what you have is a situation with no exits. Prices will not go that low. The fed isn't going to have the cohonnes to push rates as high as they should be, people will continue to margin decrease buy, inflation will stay with us, wages will remain flat. Hello Stagflation. Thank you Mr. Greenspan for shamelessly whoring ARM's.
Posted by: Kp | Sep 11, 2006 3:39:08 PM
i believe we'll see a nationwide housing decline but the level of pain will vary depending on location, as it always has. even though the coasts have ran up further and higher than the inland states i expect them to hold up better on the way down if primarily non housing related job and income growth exist (think NYC suburb). these are the keys to maintainability. on one hand so what if you paid $200k more for a house than fundamentals said you should. if you can pay the monthly nut and plan on staying for 10-15 years you can ride this wave to its conclusion. now if you bought in a speculative zone that might not work but good olde fashioned established single family home bedroom commuities with little speculative activity should weather the storm better than most other places.
that's a piece for those of you who need to buy today for whatever reason. beware condos!
Posted by: Richard | Sep 11, 2006 3:50:31 PM
I've been tracking the housing market for some time, and I sympathize for the "must-sell" owners.
We are now:
1) Entering the Fall/Winter season, where the supply of buyers will become more stale.
2) Adjusting interest rates continue to hurt the outlook especially since as late as 2005 saw massive option ARMs buyers who's payments will continue to rise.
3) The strong summer months turned out to be a dud with the hot summer weather and lopsided and increasing inventory.
4) Realtors will begin increasing the pressure on sellers to lower pricing in order to make commission as their earnings take huge hits. Lest we forget, they care more about closing the transaction than getting the buyer the best price.
While stories abound of inventory and some price reductions. I believe the next phase will be of foreclosures/BKs of actual owners in difficult financial times. Of the homebuilders getting sued for overpricing homes sold to the peak buyers and shoddy construction. And, of the economy getting whacked more proportionately since it was such a large part of GDP.
Posted by: Michael C. | Sep 11, 2006 3:54:33 PM
As one who lived in the center of the Dot Com bubble I am having a great time watching the housing bubble burst.
As you can tell from my attitude I am not at risk myself to the housing downturn having sold all my investment real estate in the last 3 years.
My favorite of the week is the pundits pushing home builders because they are trading at a discount to book value. Hello, with land values crashing, these book values are not real!
Posted by: advsys | Sep 11, 2006 4:10:21 PM
Interesting day today.
The collapse in gold suggests that inflation fears are abating while recession fears are rising, yet bond prices didn't get a lift.
The continued deterioration in oil and its related stocks gives weight to the recession argument. Other industrial commodities were weak as well.
With a triple-witch and inflation numbers at the end of the week, things should stay interesting. Isn't that a Chinese curse? ;-)
Posted by: Craig H | Sep 11, 2006 4:34:32 PM
The prices in real-estate are going down by day and that is not such a good thing. I believe we should wait a little bit longer and see what it will happen.
Posted by: flower | Sep 11, 2006 4:38:37 PM
Barry--
As someone else posted, check out Calculated Risk -- Pulte is offering $99K off of $500K homes in Nor Cal, and Ryland offering 40% off payment plan. In the last (1989-1996) boom and bust cycle in California, it took 63/4 years for prices to fall 30%. Looks like this is going to be a bigger decline/and or shorter.
It makes sense, because the magnitude of the price increase over long-term trend over the last eight years is 3X that of the last increase. Check the OFHEO data series chart for california metro areas on www.housingbubblebust.com
Posted by: alex norman | Sep 11, 2006 4:41:00 PM
I come from a family who's each member owns companies that do unique parts of each house, whether it be from general contracting, flatwork, woodwork, painting to landscaping....
Now, home pricing in my area of the world hasn't experiencied any sort of bubble. Inflation adjusted, we've seen less than 1% gains over the past 5 years. Yet, despite the cost of materials going up precipitously, the margin made on a typical house is still near or exceeding 30%. I can't fathom what builders in Chicago and Las Vegas are making, since the land cost isn't that significantly greater.
What's more amazing to me is that new home pricing in Houston appears to be VERY close to the actual cost. My only guess is that the vast number of illegal workers keeps the prices down, allowing the owners to still make a buck.
There are builders here in town, who're stuck with unselling houses, that are now offering packages like finished basements (1 bedroom only).... in the average house around here that'd be approximately 15% of the price of the house. In my part of town, they went nuts with the new neighborhood. Fortunately, there is an influx of people, so if they just take a break for a season, the market will catch up... and they can resume, at a much slower pace, new construction.
Posted by: Chad K | Sep 11, 2006 5:20:01 PM
They are trying to resist price declines because "...once prices fall on a widespread basis, home buyers will sit on the sidelines waiting for prices to tough" -WSJ
"I would prefer to see builders be frugal about incentives even if it means giving up sales" - Morgan Stanley's Rob Stevenson
I CALL THAT PRICE FIXING!
If I was in the home building business I would be a renegade As all the other builders were holding prices high, I would undercut them and take all their sales!!
Screw incentives, just cut prices you oligarchs!!! Its better for the consumers
I am referencing an article from Sunday's WSJ "Housing Boom Is a Memory: Lennar...."
Posted by: Steven | Sep 11, 2006 7:32:01 PM
per Craig H:
"The collapse in gold suggests that inflation fears are abating while recession fears are rising, yet bond prices didn't get a lift.
The continued deterioration in oil and its related stocks gives weight to the recession argument."
I am thinking about starting a financial advisory service that many of you may be interested in. It is based on me telling you what I just bought so you can do the opposite. :)
A few weeks ago, I bought January XLE calls which went to hell, so I dumped them once it dawned on me that the memo has gone out about oil prices until after the elections since I just didn't want to babysit them. So last week I bought GDX calls in the belief that gold was probably going to rise and...
I thought about dumping GDX this morning before the bell, but the calls don't expire until March and there's bound to be some calamity or other in the interim and I don't care to eat another oops!, so I think I'll just ride them out.
But I like the advisory idea- I get a subscriber pool that prepays $X for a month as a retainer, I give my real time trade info for you to go opposite of, and then at the end of the month, I take double what I lost, divide it by the subscriber base, and deduct that from the retainers and you have 10 days to bring the balance back up to $X or your account is cancelled and you get whatever is left on deposit, prorated for the current month. Win, win! To the extent that I actually make any money trading, there is no charge! :)
I'm thinking about calling it badstreak.com and putting it offshore to, er, avoid regulatory entanglements. Sweet deal, n'est-ce pas? And Barry better not steal the idea!
Posted by: whipsaw | Sep 11, 2006 7:52:54 PM
Hey I thought I was the only guy with that kind of luck....damn!
Posted by: bill the barber | Sep 11, 2006 8:43:03 PM
per bill the barber:
"Hey I thought I was the only guy with that kind of luck....damn!"
Nah, if people told the truth, they'd acknowlege lots of goat f*cks (army term) but they don't and won't, so we go on. But that's what trade sizing is all about and what surviving is all about. If I catch a bad streak, then I make my decisions and move to the next table.
The market dice went cold on me lately, but I am off to Tunica tomorrow to kick some c*sino ass! :) Prolly come home with a million bucks- or have to sell my car cuz I can't pay for gas to get home. :P
Should be a cleansing trip.
Posted by: whipsaw | Sep 11, 2006 9:21:57 PM
whipsaw...
don't feel bad..I bought the 'fakeout breakout' last Tuesday and Wednesday on gold. Can't say I've ever been beat up this bad this fast on anything.
But, EVERY blogger on gold was affirming early last week that THE BREAKOUT IS HERE>>>WE'RE GOING TO SEE A SPECTACULAR RUNUP
there's a LOT of company for us out there...lol
Posted by: spinning_head | Sep 11, 2006 10:29:59 PM
Energy prices falling, interest rates topping, valuations at their lowest levels in over a decade, balance sheets strong, the economy growing at a non inflationary rate. I think that we will not only have a strong fourth quarter, but we'll have a gangbuster move in 2007. Just need to get through September.
Posted by: Mike | Sep 11, 2006 11:38:20 PM
The comments to this entry are closed.
