Buyer Incentives…How Far Will They Go?

We have all seen the special incentive offers that have been promoted over thepast couple years by hombuilders and real estate sales teams.  Most of the time we see ads for condos, the incentives will offer money towards closing costs, no HOA’s for a certain period of time, zero down, etc.  We have also seen condos offering plasma TV’s and cars to further incentivize the buyer to act quickly.   

Many think this is a sign of tough times ahead but most of the time these are just creative marketing tools that help separate one condo development from another’s.  With so much inventory on the market in most major cities, buyer have much to choose from as well as many incentives to purchase.  This is the time to cash in as long as you have no delusions about quick appreciation gains and turning a fast profit on your home.

Some condos are really pushing the incentives hard and offering unbelievable discounts.  For example, Grand Treviso in Dallas is offering condos from the $140’s up to over $1,000,000.  On top of their reasonable price points (at least to those of us who live in California or other major coastal regions), Grand Treviso is offering NO payments on principle or interest for 6 months, no HOA’s for an extended period of time, and no closing costs!  That’s just about as good as it gets.  These incentives may not be as creative as some, but money talks. 

Other condominium communities in Dallas are trying real estate auctions and bulk purchase models to move units.  Texas has always been a more traditional real estate market though and Dallas condos will sell at the pace the market sets regardless of auctions or bulk purchases.  The upside is that Dallas, unlike many markets does not usually overbuild and absorption stays fairly healthy. 

The National Association of Realtors says U.S. home prices have risen 50 percent since 2000.

But with higher inventory level for homes and condos, major builders like Toll Brothers, Lannar, Pulte, and D.R. Horton are offering the incentives to keep the buyers “on the market”.  Builders are even offering bridge loans to buyer until they can sell their existing homes which could take over a year.  Unfortunately, it is hard to measure if the incentives are really boosting sales and keeping buyers interested.  Buyers know that there is plenty to choose from right now as the market has been flooded with new and re-sale product.  Most of the major builders know they will survive the downturn and go back to business as usual in the near future.  Most economists however, are wondering what the slow down will do to the U.S. economy as a whole.