Home Builders Courting Buyers

Builders in previously hot markets like Phoenix; Washington D.C.; Orlando, Fla.; and California are pulling out an array of incentives to woo buyers.

Centex Corp. has been offering 12-hour sales at some of its sales centers in California, where buyers are offered as much as $100,000 off the price of a multimillion-dollar home if they buy during sale hours.

Several builders are offering guaranteed pricing, where a home’s price will be reduced if pricing has changed by the time the home closes. This incentive is aimed at jittery buyers who are reluctant to sign a contract when pricing is volatile.

In Florida, Levitt Corp. is offering to help buyers who need to sell their existing home before purchasing a new one. The company’s ads offer a “guaranteed buyout program for your present home.”

In several places, builders are offering to pay buyers’ mortgages for the first year.

Alex Barron, an analyst at JMP Securities, predicts fundamentals will get worse before they get better, as speculative investors eventually will be forced to slash prices below home builders' to sell their homes. "Six months ago, I thought this might last only two or three quarters, but now I think sales will continue to go down in 2007," Barron says.

Source: The Wall Street Journal, Janet Morrissey (07/20/06)