Quote from crackedback:
Why don't they just drop the price??? It's an obvious attempt to keep comps up. Lennar has been cutting prices 15% without much resistance. Just say you want to buy and prices are too high... 15% off.
Valley sellers and builders offering top-notch incentives to potential buyers
Lou Hirsh
The Desert Sun
August 27, 2006
In the Coachella Valley's crowded and competitive housing market, what will it take to get buyers into some of those 7,000 unsold new and resale homes? Costa Mesa investor Andrew Birnbaum is dangling a special prize for the buyer of his condominium at Deep Canyon Tennis Club in Palm Desert: A brand-new set of European-made Hippo golf clubs, valued around $500.
"It's ironic that it's a tennis club, and we're offering golf clubs," said Birnbaum, who with two other investors owns the three-bedroom condo listed since June around $322,500. "But we're getting a lot of people notice the listing and they call in: 'Hey, what kind of clubs are they; what's the condo like?'"
In Salton City, Charlotte Roa is raising the stakes a little higher. Her Riverside-based company, Helping Hands Investment, is offering a brand-new Kia Rio car - valued at $12,000 - to each buyer of one of the five manufactured homes being built near the Salton Sea, each with four bedrooms and priced starting around $199,000.
"We're trying to help people save money on the home and also on the gas," said Roa, whose company has built affordable housing units in places like Banning. "If they live in Salton City and work in Indio, they'll be able to get better mileage."
That's just a small sampling of what's being put on the table, as valley sellers try to stoke a smoldering - but currently sluggish - buyers' market. Valley home prices generally continue to rise, lately hovering just over a median of $400,000, even though unsold inventory is more than twice the level of a year ago, and recent monthly sales counts are down more than 25 percent.
Reacting to sluggish sales, local sellers are now putting into play the kind of home-shopper lures seen in communities around the nation. Sellers of new and resale homes are increasingly dropping list prices by tens of thousands of dollars.
New-home builders large and small are offering numerous incentives, throwing in free swimming pools, spas, landscaping and tiling upgrades. Some are helping out with financing - for instance, "buying down" the cost of home loans by paying 1 percent or more of the buyer's expected monthly mortgage costs.
"The market is very competitive because (sales) have fallen off from when all the builders were taking advantage of a good local market," said Rod Dargatz, director of sales for San Diego-based Trans West Housing's desert operations. "You now have more standing inventory, and builders have costs to carry."
Some home builders are also doing what they've rarely done in the valley - paying commissions of 3 percent to 6 percent to real estate agents and brokers who bring in customers.
SCOTTRADE OFFICIAL ONLINE BROKERAGE SITE
$7 online trades. Fast, accurate executions. 265+ offices nationwide.
www.scottrade.com
"You never saw that two years ago," said Leo Torres, an agent with Tarbell Realtors in La Quinta. "Some of those builders wouldn't even talk to us."
While an exact count of the market's for-sale new homes is not available, those properties are adding to toughening competition among resale properties. While the median market time for resale homes in the past six months has been around 66 days - up from 41 days a year ago - Torres said he's recently seen several homes on the market for more than 300 days, across the pricing spectrum.
The key reason is sellers' unwillingness to lower prices.
"People aren't pricing the homes where the market is now," Torres said. "They're pricing them based on where the market was a couple of years ago."
Builder Mario Gonzales, a valley native who has been constructing homes for more than 28 years, has seen many local markets like this and isn't panicking. That's in spite of the fact his company is selling on average around one home per week per development, compared with the two or more seen throughout 2004 and early 2005.
"We've generally tried not to lower prices," said Gonzales, president and CEO of Cathedral City-based GHA Companies, which has developments throughout the valley.
Instead, Gonzales said, GHA has kept sales going by offering flexible financing programs to certain buyers, and also giving financing and price incentives to buyers who agree to close the purchase in a certain time frame. At some developments, the company throws in free rear-yard landscaping, extended tiling and other amenities.
Among its strategies to keep showroom traffic flowing, Dargatz said Trans West has a program in place at some of its valley developments where the builder has become a lending entity in partnership with Countrywide Home Loans.
Trans West is essentially carrying 1 percent of the buyer's lending costs on some of its sales. For instance, if the prevailing rate on the loan for a particular customer is 7.25 percent (based on credit history and other variables), the Trans West program sets monthly payments based on a 6.25 percent rate.
At the lower end of the valley's housing price spectrum, Dargatz said that would save a buyer around $150 to $250 a month, while at the higher end, the savings could be $600 to $800 a month.
"For some buyers, that could put a BMW in their garage," Dargatz said.
Gonzales and other locally based builders contend that the current climate is actually closer to a "normal" market than what was seen in 2004. At that time, a flurry of buyers, including an untolled number of speculative "flippers," drove up prices and demand at historically unheard-of rates.
At that time, buyers lined up at sales offices or entered lotteries to purchase homes that had not yet been built - and often waited several months to see construction completed on their houses.
Home building rates have since slowed down to more accurately reflect demand, and houses are now built in much smaller phases, builders note.
Barring an unforeseen economic event, Gonzales and other builders predict it will likely take 12 to 15 months for the market to fully absorb the current supply of unsold new valley homes.
"I'm still optimistic (about the local housing market) because of the macroeconomics of this country," Gonzales said. "The economy is still good; you can still get a 30-year-fixed loan for around 6 percent - the rates are still historically low."
While it remains to be seen how well the latest incentives and giveaways move the market, the strategies are at least piquing the interest of home shoppers like Amy Blaisdell.
Blaisdell's family is seriously considering moving from the San Francisco Bay Area to La Quinta or north Indio, and in her research she has been thrilled to see "everything included" in the ads from major home builders.
She said Lennar, for instance, is offering amenities like granite counters and cherry cabinets as standard equipment - often still considered upgrades by many developers.
But the actual deciding factor for Blaisdell will be which builder offers the best deal that includes a swimming pool in the price.
"That means an additional $30,000 in damage to your pocketbook," said Blaisdell. "It just seems crazy to me to live in the desert without a pool."
"Thank goodness it seems some developers in the desert are figuring this out," she added. "Just recently I saw a few ads in the (newspaper) real estate section proclaiming 'pool included' and I almost jumped for joy."
Its an unwritten law with large builders that you don't cut prices in subdivisions where you have sold to others at higher prices.
Builders can't help but make implications that the home prices are going up when they sell to buyers. A lot of the sales offices were manned by kids in their early 20's. Order takers. No telling what they said.
Cutting prices on the same floor plan in a halfway built out subdivsion is asking for a law suit.
John
