Homebuilders adding incentives
The tide began turning, and builders began posting colorful signs and advertising "Summer Blowout Sale!" "$100,000 off!" or "Save Big!" With so many new homes on the market, builders are having to become more creative as they try to stand out -- especially in areas such as East County and parts of Alameda County with a high density of new homes.

Homebuilders adding incentives
Tue, Sep. 12, 2006

By Barbara E. Hernandez
CONTRA COSTA TIMES

Robert Burton of the Hofmann Company looks back fondly on the summer of 2005, when the home-building firm had a growing list of prequalified buyers who eagerly awaited one of its homes.

"We used the priority system; other people did lotteries and pulled people's numbers out of a hat for a chance to buy a home," he said. "There were no builder incentives then, although buyers would occasionally ask what they could do to get in a home."

All that changed this summer, said Burton, the company's sales manager. The tide began turning, and builders began posting colorful signs and advertising "Summer Blowout Sale!" "$100,000 off!" or "Save Big!"

With so many new homes on the market, builders are having to become more creative as they try to stand out -- especially in areas such as East County and parts of Alameda County with a high density of new homes.

"The first thing people say when they enter the sales office is, 'What's your incentive?'" said Burton, whose firm created Waterford at the Lakes and Reflections at the Lakes in Discovery Bay.

And Burton doesn't disappoint. He can offer a Discovery Bay Country Club membership with each home purchase (worth $8,920) -- as well as below-market financing, custom upgrades and a break on closing costs.

Other builders also provide tempting offers: Discovery Homes' Brighton Station in Brentwood and Pheasant Meadows in Oakley say the first buyer to close escrow on a home will get a chance at a Mercedes Benz; Greenbriar Homes Communities offered $100,000 off its Roxbury homes in Dublin; D.R. Horton Inc.'s Ravenswood Place and Ravenswood Estates in Discovery Bay dropped prices by nearly as much on some homes; and Pulte Homes' 17 Bay Area locations are giving away a weekly vacation for two to places like Hawaii or New York City and a $99,000 price break until the end of the month.

"This would be the equivalent of our year-end blowout sale," said Merry Sedlak, Pulte's vice president of marketing for the Bay Area.

Sedlak said Pulte was trying to avoid having a stockpile of unsold inventory.

"We're doing a great incentive for people to buy now but it's not going to last forever. It's a year-end thing," she said. Sedlak said that Pulte expects all of its unsold completed homes to be bought by the end of the month.

"If builders want to throw in a car, that's standard marketing, and God bless the buyer for taking it," said Joseph Perkins, president of the San Ramon-based Homebuilders Association of Northern California. "If you were looking for that one thing to get you into a home, then now's the right time."

Burton said the Concord-based Hofmann Company's developments are near the country club and it makes sense as an incentive. But larger incentives don't make financial sense for a smaller or private builder.

"Builders only make about 15 percent profit on a house. ... Basically it's the big guys competing head-to-head with each other and giving away $100,000 on a house," he said.

Although most builders are offering incentives, some still refuse to jump on the bandwagon.

KB Homes said it had no intention of providing buyer incentives, said spokesman Craig LeMessurier.

"We believe in our product, and think we're very competitive in the market," he said. "And we're really moving towards high-density home styles."

With the increase in new home inventory, builders -- particularly in East Contra Costa County and the communities of Livermore, Dublin and Pleasanton -- are starting to shift direction. Those areas consistently had the largest amount of new housing in the East Bay because of a combination of available land and little opposition to large-scale building. But that appears to be changing as building slows and cities reach their capacity.

According to the Construction Industry Research Board, Brentwood and Oakley in Contra Costa County and Livermore in Alameda County had the lion's share of new building permits last year.

Only Oakley's and Dublin's permits have risen since last year, mostly because of a number of new developments, like Centex Homes' Riata in Oakley and Greenbriar Homes Communities' Roxbury in Dublin, both on sale now.

"Inventories are not going to keep building up; that would be irrational," said Ben Bartolotto, research director for the Construction Industry Research Board based in Burbank. "In my experience, it tends to fix itself, and prices change."

And the changes may start from the cities themselves.

Although the city has several communities still planned, Brentwood's economic development manager, Linda Maurer, said there are going to be fewer future residential projects as it focuses on retail growth. It's a sentiment echoed by other growing cities.

"The homebuilders are certainly slowing down," she said. "At 50,000 people, we've reached our critical mass."