The surplus in homes on the market is causing
a lot of trouble in the real
estate world. There are too many homes that are
either newly built or up for sale and not enough people
are buying them. This is causing sellers to have to cut
prices dramatically in order to entice people to buy
them. That is why home builders across the nation are
enticing potential buyers with discounts and promotions on the property they are
selling. “Home builders turn to discounts, promotions,”
a July 20, 2006 article in The Wall Street
Journal, by Janet Morrissey gives the low down on
these promotions.
“As the nation’s home
builders struggle with big inventories, a surge in
cancellations and a pullback in demand, many are
aggressively offering discounts in high-profile
promotion campaigns aimed at getting a dwindling number
of home
buyers into their sales centers.
“How far will
they go? Lennar Corp. placed a two-page advertisement in
Florida’s Orlando Sentinel earlier this month,
announcing it would be giving away a home in the Orlando
area next month to one buyer who visits its sales
community and enters the drawing,” according to the
article.
This seems like a pretty risky
promotion in order to attract customers to their sales
centers; after all they are losing out on the sale of a
home, without even guaranteeing that someone will buy
one. But it seems a risk that a lot of them are willing
to take.
“Lennar isn’t alone. Creative and even
high-risk incentives have become the norm, not the
exception, for many builders, especially in Florida.
Part of the problem is that builders continue to put new
homes into an oversupplied market, says JMP Securities
analyst Alex Barron.”
“Several builders,
including Technical Olympic USA Inc.’s Engle Homes and
Lennar, offered ‘guaranteed pricing, where a home’s
price would 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 while
pricing is volatile.”
These are just a few of
the ways that home builders are trying to boost sales
when people are not buying nearly as much. This trend in
reductions and promotions does not look like it will
stop anytime soon either. It appears to be spreading
across the nation as well.
“The price cuts and
incentives aren’t unique to Florida. There are signs and
ads for significant discounts in other previously hot
markets such as Phoenix; Washington, D.C., and
California. Some builders, such as Centex Corp., had
been offering 12-hour sales at some of its sales centers
in California, where buyers would be offered as much as
$100,000 off the price of a multimillion-dollar home if
they purchase a home during the sale hours.” |
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