To Discount or Not to Discount?
Professional Builder
By Susan Bady
...In January 2009, D.R. Horton launched a marketing campaign in Las Vegas called the Builder Short Sale. Prospective home buyers were urged to compare the advantages of purchasing a new Horton home to buying a foreclosed home. A spokesperson for D.R. Horton told the Las Vegas Review-Journal that the builder was offering discounts of up to $70,000. The newspaper subsequently reported that Horton sold 150 homes in two days...
... It's important to note that builders are making other concessions besides discounts, particularly in large developments where a portion of the homes are already sold. "Maybe they would prefer not to discount because of the people who bought at higher prices," says Delores Conway, director of the Casden Real Estate Economics Forecast at the USC Lusk Center for Real Estate in Los Angeles. "A lot of times they'll go with upgrades, such as granite countertops or higher-end appliances. This is especially true of condo developments where there's a lot of uniformity in the units."
In order to finish developments that are already entitled, builders are also cutting square footage, especially in California's overbuilt Inland Empire. Smaller homes not only cost less to build but can be priced closer to market rate. "Some of the houses have the same facade as the rest of the development, but they're 2,000 square feet instead of 3,000 square feet," Conway says...