August 18, 2007

Instead of slashing house prices for all to see, desperate builders go crazy with incentives, and increase the blatant realtor bribes

Got a few thousand homes that nobody can buy anymore, that are still insanely overpriced? Well, seems like the best thing to do at that point is cut the price, right? As in drastically cut the price?

Nope, not if you're a desperate new homebuilder. If you simply slash the price, then you've essentially "Marked to Market" (there's those damn three words again) your entire inventory of unsold homes - and also those of your competitors. And then it would be clear to everyone that the game was over.

So what are they doing? They're blatantly distorting the "median price", and are out trying to move dead inventory with crazy incentives, which in my book is simply mortgage fraud as the home is wildly overappraised versus true value. Plus they're paying bribes to realtors to steer unsuspecting sheeple into overpriced sh*tshacks. Yup, gotta love those meaningless NAR ethics.

Here's some of the incentives: No payments for X months. We'll pay your property tax and home insurance. Free cars. $100,000 upgrade packages. Pools. Garages. Closing costs. Flooring. And hookers & cocaine (well, not yet, but just wait)

And don't forget, in the middle of all this, there's blatant collusion and pricefixing now amongst the homebuilders... FLASHBACK: Here's Hovnanian's desperate CEO a few days ago, in complete violation of price fixing statutes:

"Raise prices," he said. "Buyers aren't buying because they think you're going to lower prices again. There's interest but there's fear. Raise prices 3-4 percent. And quit giving discounts.''

Here's the article on incentives. So remember, when you hear the NAR and US Government numbers on housing median prices, just laugh. And laugh and laugh some more.

Perks, Price Cuts Become More Lavish As Developers Grow Increasingly Desperate; Would You Like a Pool With That?

With the housing market looking increasingly frail, home builders and real-estate agents are going to new extremes to attract buyers, dangling lavish incentives and slashing prices.

Builders generally try to avoid outright price markdowns, in part because it angers prior home buyers who don't want prices in their subdivisions forced down.

In markets such as Denver and Seattle, builders are increasingly willing to pay agents substantially larger commissions -- as much as 4% of the home's sales price, up from 1.5% or less -- to help unload inventory homes


Anonymous said...

I got into the market because I didn't want to be priced out of the market forever, that was my incentive.

mrmx said...

well, I think that incomes are out of line with the prices of homes. I certainly won't trade early retirement for a mortgage payment!

I grew up believe that one should pay their bills not the cost of financing those bills.

Anonymous said...

OK don't lower the price. Give me 25% cash back at closing.

Anonymous said...

I'd appreciate it if somebody with experience (particularly recent) with new construction can answer my question.

I signed a contract on a new house in April. At that time the prices were officially slashed by 10K. I'm not sure how this happened... I had seen the previous list of prices, but I don't believe they sold any of these particular models before the grand opening advertising the new prices. It seems to be just a short window of attempting to sell the new release at the higher prices and realizing it's unrealistic in the present market. They were talking about increases and did increase the prices in May by about $1,200 and in June by about $800. No change since then. I'm being delayed because I had the opportunity to change my lot in June. Higher incentives were offered only on this particular (premium) lot. I was given these incentives, but at the current price.

I was wondering what happens if I hire my own independent appraiser and his number doesn't match the builder's (I'm using their financing obviously - those pesky incentives...) Can I do anything about it other than walking away if prices continue deteriorating? I'd really hate to do this not only because of losing the deposit, but because I know for a fact it will be a booming area and the homes are extremely energy-efficient for their still reasonably looking price. The subdivision appears to be selling OK (it's basically the only one in the city not really in the boonies and built by a reputable builder), but I haven't been able so far to find out what incentives are offered now. The house won't be done probably at least until January of next year unless they work some miracle and try to put more homes on their books by the end of December. The problem is that these models are brand new and there are no real comps at this time. The first houses similar to mine will be finished about 2 months earlier. Any advice? If it makes any difference, we're talking about a picture-perfect buyer these days ;-) - 20% down and pristine credit, so not somebody they'd like to lose. In this case, though, they have every motivation to inflate the appraisal because there's no risk for them. I wonder what's gonna happen with the other buyers who intended to put less down... Since the builder's mortgage company sells the loans immediately, they ought to be sellable nowadays. I'm afraid many buyers may be denied generating more specs. If I am to walk away, they're not likely to get more out of the house as a spec. Chances are they'll get less. More specs around make me nervous about my home value if I go through with the purchase. Am I in any bargaining position?

Anonymous said...

Those knives are just what I need to make a good steak sandwich.

frank said...

I'm a REALTOR and these bribes embarrass me. We don't accept bribes. We give everything over our agreed rate back to the buyers.

Frank -

Anonymous said...

We don't care about incentives..........................................................................................................cut the price!