It's All About The Extras In The Housing Industry
Wednesday, August 16, 2006SUSIE GHARIB: A trickle of discouraging news about the housing industry seems to be turning into a flood. The Commerce Department said today that builders broke ground on new homes in July at the slowest pace in two years. July housing starts fell 2.5 percent to just under 1.8 million units on an annual basis. Permits for future building fell 6.5 percent to just under 1.7 million units. That`s the slowest rate in four years. Those new permits are typically an indicator of builder confidence and housing experts say permit cancellations are rapidly becoming a big problem.
DAVID SEIDERS, CHIEF ECONOMIST, NATIONAL ASSOCIATION OF HOME BUILDERS: Cancellations by the investors or speculators combined with cancellations by normal people that can`t sell their existing homes or at least can`t get what they thought, combining to drive those cancellation rates up dramatically over the past year. This is not a minor matter.
GHARIB: The National Association of Home Builders says it expects that trend in cancellations and housing starts to deteriorate even more over the next few months. It`s looking for the market to bottom out in the first half of next year.
KANGAS: But if you`re looking in the market to buy or sell a home now, chances are you`re looking for creative ways to do it. Slowing home sales in once-hot markets are making something old new again. As Stephanie Dhue reports, sellers are now offering buyers a wide range of incentives to drive deals to closing.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Anita Phil-yaw has been shopping for a home for six months. She says now it`s a clear buyers market.
ANITA PHILYAW, HOME BUYER: This is what I call the best of both worlds. DHUE: She has watched the slowdown and found that prices in the Washington, D.C., market are stabilizing. The home she`s looking at today comes with the added incentive of a $10,000 credit to apply toward closing costs or to buy down the interest rate. That`s a far cry from what was happening when she first started her search.
PHILYAW: Things have changed, prices have stabilized and gone down somewhat. For what one could get for a property six months ago, they cannot get it now.
DHUE: Sellers are offering a wide range of incentives these days. Home builders will finish additional rooms. Condo sellers will pay the condo fee for a year and some sellers will even throw a new luxury car into the deal. Realtor Dianne Bailey says incentives can push buyers who may be on the fence.
DIANNE BAILEY, REALTOR, LONG & FOSTER: They have to have an impetus to do this, and I think by the sellers convincing them to go a little extra and offer extra incentives for down payments, which are money that they have to come out of their pocket initially at the sale, helps people to make that move.
DHUE: Still, not everyone sees incentives as a plus. Incentives can mask price declines in the real estate market. That`s because home price statistics come from the stated contract price and don`t include seller give-backs.
RICHARD GREEN, REAL ESTATE PROFESSOR, GEORGE WASHINGTON UNIVERSITY: If you sell a house for $950,000 and throw in a Mercedes, you`re really selling it for $900,000, but it will show up as a $950,000 transaction.
DHUE: Mortgage companies are also giving buyers deals offering to cut fees to generate business. Experts say that could be another hidden sign of an increasing slowdown in the housing market. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
