Saturday, November 06, 2004

Some builders offering sweeter deals on homes

Some builders offering sweeter deals on homes


Saturday, November 6, 2004


Buying a house these days is starting to seem a lot more like buying a used car. Just check out the ads: free financing for a year; discounted option packages; no payments until 2006.

What's next, zero-percent financing?

Only in your dreams.

But as the market softens and as more builders get into the mortgage business, a growing number are dangling innovative financial incentives.

"It's becoming less of a seller's market right now, and so we're starting to see some of the standard inducements we used to see," said Michael Carliner, an economist with the National Association of Home Builders in Washington.

With mortgage interest rates still lower than many people have seen in their lifetimes, the market still is healthy, Carliner said. But a growing number of builders are realizing that with plenty of houses to choose from -- both new and existing -- consumers are getting more value-conscious.

"The market has been so strong for so long that builders have not had to do very much, and I think you might see a little more aggressiveness on the part of builders just given the state of the current market," said Scott Sim, vice president of sales for Pulte Homes of Minnesota.

Sim said that like many larger builders, Pulte always has offered a variety of concessions, but in recent months the firm is changing strategy and trying to reach those who are strapped for cash and those who don't have a down payment.

"Builders are getting a better understanding of what things matter to buyers, and financing is a way to tailor programs to meet unique buyer needs," said Mike DeVoe, vice president of operations for Pulte. "It's not that the size of the incentive is any different than it might have been in the past; it's evolving more and more to help people get into a new home."

Through its own mortgage division, which a growing number of builders and real estate companies now have, Pulte is offering an incentive package that enables qualified buyers to apply all or part of a $14,000 assistance/upgrades package to their interest payments for a year. That would lower the payment on a $195,000 mortgage to $254 a month, reflecting the principal-only portion of the mortgage payment.

The market is becoming increasingly competitive largely because there has been a steep increase in the number of large national builders in the Minneapolis area, said Todd Stutz, president of Rottlund Homes Minnesota and David Bernard Homes.

That includes K. Hovnanian of New Jersey and Toll Brothers Inc. of Pennsylvania, which have ample resources and expertise to launch sophisticated marketing.

Stutz said concessions are not new to Rottlund, but the kinds of deals they're offering are new.

The company tries to tailor incentives to specific market segments: Entry-level buyers often prefer entry-cost assistance, while move-up buyers often favor appliance upgrade packages.

Right now Rottlund isn't swimming in excess inventory, but Stutz acknowledged that many companies are, so it's no surprise that concessions are becoming more commonplace.

Specials not only stimulate activity, he said, they also enable companies to differentiate themselves within the marketplace and create a sense of urgency among buyers.

"Our promotions are usually tied to a period of time so you have to take action. It's really to stimulate activity," Stutz said.

"We've become somewhat a society where consumption habits are formed by what's on sale, and home building is no different."


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