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| More rates and news from Buyer Incentives May Not Last Long(Home buyers have recently had the privilege of knowing how sellers felt for the majority of the new millennium, scoring great deals and receiving incredible incentives just for taking a tour of the property. )
Unfortunately, the word is spreading slowly and the notion of a buyer’s market has been heard but is not yet known universally like the seller’s market was during the boom. But a new report shows that potential home buyers do not have too much time left to take advantage of their market, as prices may stay low for a while but the great deals are about to pass by the window.
M. Anthony Carr, Realty Times columnist, further explains why these deals will be short lived, in his December 1, 2006 article, “Good Deals Will Begin Disappearing With Lower Inventory.”
There are currently amazing offers being presented to potential buyers from home builders across the U.S. “$8,000 to closing credit to purchaser, 5 percent closing cost credit (on $500,000 price = $25,000) and a free rec room, full bath and $10,000 in closing,” are just some of the highlighted deals you may see online or in a variety of publications.
These offers, combined with the surging popularity of 100 percent financing are making it possible for a potential buyer to literally buy a house without paying a dime in out-of-pocket expenses. No closing costs and even credit? These deals seem too good to be true.
Why have builders been offering such insane deals? “Builders are on a drop till you shop campaign, waging a battle against swollen inventories and dropping sales numbers. If you have a community of 100+ houses, inventory standing at 3 to 6 months and sales are down 15 to 25 percent -- you would be wheeling and dealing as well.”
Put yourself in the builder’s shoes. You have 100 plus houses for sale and have to pay monthly expenses on each and only a couple has been selling here and there. You are going to want to offer incentives to sell as many houses as quickly as possible.
Even though it has been taking a while to sell the abundance of new homes, the inventory will eventually begin to fade. There is currently a surplus of new home inventory (6.4 months) but buyers are just catching wind of their favorable market. As word spreads of these great deals, inventory will diminish.
“Once the inventory is reduced to an acceptable level, the incentives will evaporate. If you have too much gas and you need prices to move upward, what do you do? Cut production. The same is true in the housing industry -- if prices are falling, you're giving away cash and free upgrades, how do you keep from having to do that? You cut housing starts.”
There have been reports that housing starts dropped more than 14 percent in October, which means that this premonition is coming true. Inventory is waning and the great incentives that buyers are getting excited about may be gone by the time they leave their driveway.
“Buyers waiting for prices to hit bottom and incentives to top out may have that situation right in front of them. Opportunity's knocking. Would someone get the door?”
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