On the fence about whether this is the house for you? Maybe a free swimming pool will convince you. Or perhaps a free vacation.
Such is the state of U.S. housing, as home builders pull out all the stops to keep business booming — a sure sign the once red-hot market has turned in favor of the buyer.
Nearly all measures of housing activity have pointed not just to a slowdown but to a sector that is struggling. Sales are sliding, supply is swelling and price appreciation is abating. Now, home builders are going beyond offering free washers and dryers, refrigerators and microwaves, ponying up more expensive perks and luxury items to lure buyers.
Las Vegas-based Wagner Homes is giving away swimming pools said to be worth $30,000 on some of its projects.
"We had three homes sitting on the block for six months without a buyer," said LaRae Obenauf, office manager at Wagner. "Within the past two months we threw in the pool, and we saw a big increase in interest."
The result: All three homes are now sold.
Some incentives — occasionally in the form of cash via bonuses, refunds or fee waivers — are worth as much as $100,000, said Larry Murphy, president of SalesTraq, which monitors real-estate trends in the Las Vegas area.
"Swimming pools, gold club memberships, home landscaping ... all of them are being offered," Murphy said. "Home builders lower prices only as a last resort, so prior to that they prefer to give incentives, which are masked within the sales price. They don't want to reduce prices, not only for the peace of mind of having to deal with the homeowners who have already bought but because it would cause problems with appraisals."
Extravagant incentives are most prevalent in states such as Florida, California and Nevada, where home prices had risen the most but are now seeing the sharpest softening, analysts say.
Prices in Las Vegas surged by nearly 16 percent last year but added only slightly more than 3 percent in the first quarter of 2006, according to data from the Office of Federal Housing Enterprise Oversight.
Nice to meet you, Mr. Clooney
And if that new plasma-screen television is not enticing enough, how about the opportunity to rub elbows with a Hollywood celebrity?
A bevy of builders in New York City are paying top dollar to entertainers just to show up for viewings, according to Diane Saatchi, senior vice president with the Corcoran Group, a residential real estate firm in New York.
"Celebrity open houses are definitely popping up," she said. "Particularly in the new developments, which is proof they are doing all types of things to attract buyers."
The celebrities showing up for open houses are not exactly what many would deem "A-listers," but they are drawing crowds.
"Put it this way: If George Clooney was served up instead of a free lunch, attendance would skyrocket," said Saatchi.
Take a vacation
All that house hunting got you feeling tired? Take a free vacation courtesy of your mortgage lender.
"One of the gimmicks right now for closing a mortgage loan is a free vacation to Hawaii," said Anthony Hsieh, president of LendingTree.com, on online facilitator that matches consumers to lenders competing for their business.
But buyer beware: The vacation voucher usually carries a number of stipulations, and consumers often pay for freebies with higher interest rates and closing costs, he said.
The Mortgage Bankers Association's latest seasonally adjusted purchase index showed loan volume down 20 percent year-over-year during the week ended July 21. The downturn was even more pronounced in the loan refinancing index, which showed a more than 40 percent drop.
To attract business, some lenders are offering two free airline tickets to borrowers who refinance their home loans.
"Any time there is increased competition in a shrinking market there are free toasters everywhere," said Hsieh, who is based in Irvine, California.
Agents also see incentives
After historically low mortgage rates fueled a five-year housing boom, the sector is feeling the heat as rates hover near four-year highs. Some home builders, looking to unload a property, have been cozying up to real-estate agents, offering sales commissions of up to 10 percent.
"In this environment you are always looking to think outside of the box," said Ellen Bitton, president and chief executive officer of Park Avenue Mortgage Group, Inc. based in New York, who added that her firm sometimes offers lunch to potential customers. "Obviously, we'll have a better lunch layout for a $3 million dollar house than a $300,000 studio."
Signs of a cooling market have been more evident in the past few weeks as a deluge of data showed an excessive supply of homes, declining sales and falling prices.
Scott J. Cooper, president of Old Merchants Mortgage Bankers in Lake Success, New York, said his firm is offering refunds on home appraisals, which can range from $300 to $800.
"The market certainly got tougher and it's more competitive, so one thing we are doing is we're closing loans a lot faster," he said. "Lowering rates, lowering points. We are doing just about anything we can to make the consumer happy."
