Posted on: Wednesday, December 12, 2001

Home sellers offering some added incentives

By Thomas A. Fogarty
USA Today

Recession grips the economy, but home-building industry executives say they remain a long way from adopting automaker-style incentives to prop up sales.

Says Pulte Homes CEO Mark O'Brien: "The market appears satisfactory to us. It's very much unlike the auto industry."

Nonetheless, new home shoppers in some markets are finding attractive specials:

In Denver, Ryland Homes offers an interest buy-down that holds the rate below 4 percent for the first year and below 6 percent for the 30-year life of the mortgage. In Dallas, Ryland is offering buyers 4 months with no house payment.

In Northern Virginia, Centex Homes recently advertised a $20,000 credit against closing costs at one development.

At one of its Austin, Texas, subdivisions, Standard Pacific Homes advertised interest rate subsidies and a free home theater. Industry executives say such deals are business as usual, not recession-inspired panic. Local market conditions dictate their use, they say.

"It's the holiday season, and people are incredibly distracted. This gets their attention," says Ryland's Eric Elder about his firm's incentives.

Twelve percent of new home developments nationally are offering incentives ranging in value up to $35,000, according to industry tracker the Meyers Group. Meyers has no comparable historical data, but analyst John Burns says the use of incentives is probably higher than normal. Further, Burns says, builders are more likely now to offer unadvertised concessions when closing a sale depends on it.

New home sales have lost some steam lately, but the market remains strong by almost every measure. The annualized rate of 880,000 home sales in October is 4.5 percent below October 2000. Yet the monthly pace is within a whisker of the 1998 total, when the industry sold a record 886,000 homes.