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Saturday, April 22, 2006 - Page updated at 12:00 AM

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Selling in a buyers' market

The Associated Press

NEW YORK — Pete Montero listed his Ann Arbor, Mich., home nearly a year ago at $379,000.

The 2,600-square-foot home didn't attract buyers, so Montero dropped the price in $10,000 increments — he's down to $329,900 — and has considered remodeling the kitchen.

"We really didn't think any individual thing about the house would make it difficult to sell," said Montero, whose four-bedroom home has a finished basement and sits on a cul-de-sac.

Spring is typically the busiest time of the year for home sales. But with mortgage rates rising and sales slowing nationwide, some sellers find they have to work harder to get a sale.

In February, there were 3.03 million previously owned homes for sale, a level not seen since 1991, when 1.91 million homes were up for sale, according to the National Association of Realtors.

"Business is tough," said Martin Bouma, an Ann Arbor real-estate agent. "The inventory of available properties has increased. You are looking at [the number of] buyers going down, and inventory is going up."

Some incentives offered by sellers include a year's worth of free landscaping or lawn care, free snow removal for a year or alarm service for a year. And that's just from the owners of existing homes. Builders sitting on a mound of inventory have also had to come up with new ways to woo buyers.

The tempered pace of home sales in recent months follows years of record activity — 7.98 million homes sold in 2004, followed by a record 8.35 million in 2005 — that saw bidding wars and a steady escalation of prices.

The first signs of an ebb in national demand appeared last summer and have continued into this year. Applications for home loans, a gauge of future home sales, are down 20 percent from last year, according to the Mortgage Bankers Association.

"I have seen it transition from a seller's market to a buyer's market," said Bob Moulton, a mortgage broker based in Manhassett, N.Y. "Buyers are putting in bids, but they are not counteroffering."

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The process of selling a home, meanwhile, is taking longer. That trend is reflected in heightened demand for longer rate locks, a guarantee offered by lenders to keep the rate on a mortgage at a set level for a certain period. In recent years, rates for mortgages were guaranteed for 30 to 45 days because homes sold quickly. Now borrowers ask for 120-day rate locks.

While some homes can be taken off the marketplace by their owners, builders cannot afford to hold on to empty homes. So some have offered their own incentives, such as helping to pay mortgage closing costs or upgrading kitchen appliances.

"This year we're being a little more aggressive from the advertising and incentive standpoint," said Paris Reese, chief financial officer of MDC, a Denver-based builder. "Incentives are an important part of our business, but we're not doing any fire sales."

Dallas-based Centex, meanwhile, has kicked off a series of 12-hour sales in Seattle, Las Vegas, Houston and Denver, among other markets. In Sacramento, Calif., Centex lopped off $100,000 from some multimillion-dollar homes.

Centex likens its sales to a retailer clearing unsold inventory off shelves. A spokesman for the company, Neil Devory, said the 12-hour sales have "tremendously increased traffic" but wouldn't say how many sales resulted from the promotions.

"We had significant numbers of contracts and reservations," Devory said.

At the same time, Toll Brothers' push to get customers across the threshold is a little more subtle, but just as persistent.

Kira McCarron, chief marketing officer for the Horsham, Pa.-based builder, said the company relies on print, Internet and some television and radio advertising.

But, what's going on at the model homes is what's different.

"A message is crafted for each location," McCarron said. "We pick a hypothetical family or a couple we envision this home will be designed for."

For example, a refrigerator magnet in a Toll Brothers home may have a message to a fictitious family member about a relative that has to be picked up at a train station, demonstrating that mass transit is nearby. Or a school jersey hung in a bedroom of the model home serves to remind buyers of a good school district.

In addition to personal notes and school jerseys, Toll Brothers' marketing involves staging Easter egg hunts, Halloween parades, charity events or PTA meetings — another reminder of a neighborhood's school system — within a development.

"We want them to feel emotionally connected to a place," McCarron said.

But aside from special events and upgrades to kitchen appliances, the single factor determining whether a home attracts buyers likely will be its price.

"You can have the biggest circus on the street, but it comes down to price and having the right price," said Bouma, the Ann Arbor agent.

Maria Janeidas, an information-technology consultant based in Manhattan, looked at about two dozen homes in six weeks on the north shore of New York's Long Island but didn't find any bargains.

"There is still a disparity between what a seller believes their home is worth and what buyers are willing to spend," Janeidas said.

In March, months after she sold her home, Plandome, N.Y., resident Donna Prudenti decided to hold off from buying another home. She visited seven properties and decided to rent an apartment because of high prices and uncertainty about the market.

"I'm just going to wait and see what happens," Prudenti said.

Copyright © 2006 The Seattle Times Company

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