Yesterday’s Tacoma News Tribune had an article about new construction in outlying areas, which is becoming front line of the Puget Sound housing bust. In short: it ain’t pretty for builders.
Facing fewer buyers and many, many homes for sale, South Sound builders are pulling back and getting extra promotional.
Builders have slowed construction schedules in recent months, cut prices, offered their biggest-ever incentives and even rented out finished homes that couldn’t find a buyer.
…builders are looking to unload even more of what’s built and empty. In March, 1,485 new homes, excluding condos, were listed for sale.
It used to be that half of the homes sold by Soundbuilt, one of the area’s largest builders, were properties with homes either under construction or yet to be built, said Gary Racca, owner of the Puyallup company.
Uncertainty about the economy, however, means consumers are holding off, and now 90 percent of the company’s sales are on ready-to-move-in homes. But completing homes without a committed buyer can be risky, because the builder fronts the cost and often has to secure and pay to finance the construction.
The company has launched a first-time promotion: a price guarantee, which allows someone to buy a not-yet-constructed home at a locked-in price and ensures that if Soundbuilt lowers prices on other similar houses in the subdivision, the buyer will get the same discount.
Of course, they’re still confident that all they need to do is “get the momentum back” with a few discounts and incentives here and there, then they can get back to jacking up the prices.
(Devona Wells, Tacoma News Tribune, 05.04.2008)
These articles always make it sound as if home purchasing was discretionary spending.
“Yeah, buyers need a little motivation”; like making you buy the HDTV you don’t need.
They don’t realize that unlike a DVD player; most people can not afford to have 2 or more houses.
Someone should look into how these lock-ins will be working. It’s arguable that the builders can get around them by marginally changing the later sold units by doing some minor upgrades for a few thousand bucks to avoid ten of thousands of losses, then argue that the two properties weren’t identical, extricating them from the agreement.
budbrad, my thoughts exactly. The publicly touted agreements I’ve seen so far usually state that the price guarantee lasts from the time the contract is signed until the sale closes. All that does is give the builder an incentive to close the sales in waves.
As long as the builder makses sure that the sales that close in any given wave are dissimilar the guarantee is useless.
“Bellevue-based Quadrant Homes, unlike other builders, does not put up anything that isn’t already pre-sold.”
Yea Right…there are two Quadrant Editions in the Olympia area that have dozens of Un-Occupied homes and have been that way since last September. And they have $500 move in signs everywhere and people standing on street corners waving arrow signs all weekend. Not to mention my wifes new boss just moved in from out of state and bought a quadrant that was “Ready to Move-in”.
“On these next 10 houses I’ll give some good pricing. But after that, my prices go back up,” he said. “Every time there’s a slow market, a stronger one follows. There’s only so much land.”
This builder is completely out of touch with the market. I bet he pays $60 for the toilets in his homes but charges buyers over $300.