Perks Plentiful as Builders Try to Sell Homes Slowing market prompts builders to offer everything from status cars to free granite counters and more
RISMEDIA, June 24, 2006—(MCT)—“Oh Lord, won't you buy me a Mercedes-Benz?"
You won't have to make that heavenly plea if you buy an Ecclestone Signature Home: The leased luxury car will be waiting for you in your garage.
Following a year in which local builders couldn't build fast enough to keep up with demand, new-home sales are slowing and cancellations are rising. The shift is prompting builders to offer everything from status automobiles to free granite countertops, stainless steel refrigerators, cash incentives and discounts.
"Hurry Home One Day Sale!" shouts an ad in Wednesday's newspaper by giant home builder Lennar Corp., which has been in business for more than half a century. "Buy a home on Saturday, July 22, and claim your share of the 8 million dollars being given away! Any reasonable offer will be accepted!" Looking more like a Macy's end-of-season clearance sale than a typical real estate ad, it also offers special financing and "food, fun and amazing savings!" The Lennar ad features nine new-home communities from Montreux near Boynton Beach to Woodfield in Vero Beach.
Company execs did not return several phone calls and e-mails.
But a leading new-home expert says buyers who show up at a Lennar development Saturday expecting to be handed a million dollars are going to be disappointed.
"Lennar is not giving $8 million away," Bill Hall, director of New Homes and Communities by Illustrated in Palm Beach Gardens, says emphatically. "They're a public company and their stockholders would go ballistic."
Lennar is, however, reacting to a market slowdown and trying to entice buyers, which is exactly what the home builder said it would do in its quarterly earnings report issued this week.
"Builders are trying to combat a lethargy that's probably caused by people being afraid of buying a house today and finding out the same house is priced less in two months," said housing economist Bradley Hunter, director of MetroStudy's South Florida region.
"Lennar is basically saying 'make an offer,' figuring that's a good way to make people feel comfortable that they can get a good deal."
Industry analysts say leading home builders all around the country are resorting to incentives to spur sales. Home builders also are cutting their 2006 earnings forecasts as shares slip from the record highs of June 2005. DR Horton Inc. (NYSE: DHI, $20.85) shares, for example, have lost half their value since reaching a 52-week high of $42.82 in July 2005.
Also at issue is concern the Federal Reserve will raise short-term interest rates a quarter-point to 5.5 percent at its Aug. 8 meeting, further dampening new-home demand. There was hope on that front Wednesday, when Federal Reserve Chairman Ben Bernanke's testimony before Congress indicated the Fed might pause now, sending markets sharply upward.
Regardless of the Fed's move in August, the impact of fewer buyers on the market is a rise in new-home inventory. Indeed, the measure of inventory for new homes in May stood at 5.8 months, according to Economy.com, its highest level since early 1996.
The slowdown is all the more noticeable coming on the heels of record-setting sales in 2005, a year that saw prospective new-home buyers throughout Palm Beach County and the Treasure Coast camp out overnight to get the homes they wanted. It's little wonder that home builder optimism fell for the ninth straight month in July, slipping to its lowest mark since December 1991.
The National Association of Homebuilders' Housing Market Index, which measures builder confidence, has fallen 33 points from its most recent high a year ago.
Nevertheless, buyers are not going to see prices tumble, said Hall, of New Homes and Communities by Illustrated.
"Builders might offer cash at closing instead of upgrades, or buy down the interest rate, but construction costs haven't come down," he said. "The buyer out there is in a little bit of fantasyland thinking he will get a reduced price."
But Realtor Sarah Mazor of Mazor Realty in Boca Raton says it's still a good time to buy.
"There are deals out there," said Mazor, a buyer's agent who specializes in pre-construction and new construction. "This is the time to do it before the market gets back to a normal pace and these incentives disappear."
A lot of condo conversions are waiving developer fees or paying the first year's mortgage, she said. One large home builder is offering $30,000 at closing or 3 percent of the purchase price, she added, while others are pledging to sell homes at lower prices if they go down after buyers sign contracts.
"It's up to consumers when they decide it's safe to go back into the water," said MetroStudy's Hunter. "Sooner or later people will get tired of waiting on the sidelines, and when they have a reason to buy a home, they will just make that choice and not worry about it.
"They will go back to thinking of a house as a path to a lifestyle and not a way to get rich."
Copyright © 2006, The Palm Beach Post, Fla.
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