Buyer's Market
Home incentives, discounts and upgrades make now the time to buy

LAWRENCEVILLE - Debra Pardo's home search has been tough.

Not because she can't find a home in the right price range or in the right location or with the right features.

Quite the opposite, actually.

The search has been tough because Pardo and her husband have had too many good homes to choose from. The couple had to leave their New Orleans home because of rising insurance rates and they've been shocked by the number of quality homes at reduced prices in Gwinnett County.

"There are a lot of deals here," Pardo said. "I don't understand it. Why is nobody buying a house any more?"

While the answer to that question ranges from a lack of consumer confidence to confusion about the lending industry, it's apparent many home builders believe the solution is to offer incentives.

Local real estate agents say they have never seen discounts and upgrades in Gwinnett like they're seeing now.

"With new construction incentives, the sky's the limit," said Lin Stadler-Perry, a Realtor with Century 21 All Atlanta Inc.

For instance:

' Meridian Homes gave away a house this spring during a promotion aimed at attracting people to its properties. This fall the company is giving away a convertible.

' Centex Homes has been giving away $20,000 gift cards for stores such as Lowe's, Macy's and Best Buy to buyers of select homes in the company's neighborhoods, said Marv McDaris, senior vice president of operations.

' Touchstone Homes is offering the first 10 buyers at its new Riverdance Community in Suwanee the opportunity to "live free until spring 2008."

' Eugene James, the Atlanta director of the housing market research firm Metrostudy, said he even saw one neighborhood offering $40,000 off a home priced in the low $200,000s.

"This is definitely consumer driven by the slow market," said Bryan Cohen, president of Suwanee-based Touchstone Homes. "It's a great example of how the consumer is the great beneficiary of these slow times right now."

James said things are so slanted in favor of the consumer right now, buyers shouldn't be afraid to see how far builders will go to get them to buy.

"Now's a good time to ask for whatever it is you like," James said.

Stadler-Perry said she even knows of several builders who are buying less-expensive homes so those owners can move into more-expensive new homes.

"It seems (builders) are doing just about anything they can to get rid of standing inventory to stop the financial bleeding," Stadler-Perry said.

Inventory equals incentives

The main reason builders are offering so many incentives is rising inventories.

Excess inventory is nothing new to Atlanta, since the area has historically been a speculative housing market, meaning homes are built with the assumption there will be buyers. Atlanta has been a speculative market, and remains a speculative market, because of the number of people who move to the area for new jobs, said Steve Palmer, chief financial officer of Duluth-based Bowen Family Homes.

"Atlanta's still a 43 percent relocation market and those people generally need homes now," Palmer said.

But the amount of excess inventory has now gone well above healthy levels.

Atlanta had about a 10-month supply of new and resale homes in the second quarter of 2007, according to data from Metrostudy. A normal level for the metro area is about an eight-month supply, James said.

Months-supply statistics estimate how long it will take to clear the existing inventory of homes by dividing the number of houses for sale by the current rate of home sales.

Inventory built up because many builders weren't able to recognize the housing market was slowing until it was a little too late.

"You don't know you're in the middle of a slowdown until you're in the middle of a slowdown and you don't know you're out of it until well after you're out of it," Cohen said.

Builders have since pulled back on the number of homes they're building in the county (construction permits are down 44.1 percent in the first eight months of 2007 as compared to the same period in 2006), but they've had to resort to incentives to draw buyers back out.

More homes have also been on the market because of the record numbers of foreclosures in the county. Gwinnett saw 8.2 foreclosures per 1,000 in population in 2006 as compared to 2.8 foreclosures per 1,000 in population in 2002, according to data from Alfie Meek, director of Gwinnett County's economic development division.

Foreclosures have continued to rise this year, with 31.8 percent more homes having been foreclosed on in the first 10 months of 2007 than in the first 10 months of 2006, according to data kept by the Gwinnett Daily Post.

New homes v. resale - Where are the better deals?

Despite similar amounts of inventory in the new and resale markets, there still seems to be some disparity between what builders are willing to do and what homeowners are willing, or able, to do to unload their property.

"This is probably the first time I can remember where the market value of a piece of property is not close to what the seller thinks the market value is," Stadler-Perry said. "If the market will bear it, you will sell it. But because of the inventory we have, the market value is not going up. It's stagnant or decreasing, which is the first time we've seen that."

Stadler-Perry said it's been difficult making sellers understand the current marketplace.

"That's a hard pill to swallow if you're a homeowner and trying to sell," she said.

James agreed, saying buyers should expect better deals on new homes rather than on resale homes.

But Stadler-Perry and James are taking different stances on how current homeowners should treat the sale of their current houses.

Stadler-Perry has advised homeowners to wait on selling if at all possible, while James says sellers might want to make concessions of their own to get into a new home now.

"Some of the deals are so good, it makes sense to reduce the price of your existing home to take advantage of the great deals being offered," James said.

How long will the deals last?

So with incentives being so enticing now, why haven't more buyers entered the market this year? Some in the industry say buyers keep waiting for low prices to drop even lower.

Palmer said while sales have been down 20 percent this year at Bowen Family Homes, visitor traffic has actually been up. That leads him to believe there's a pent-up demand.

"My only difficulty in sales is getting people to commit," Palmer said.

It's not a matter of buyers being unable to purchase homes - a conventional loan is not that much more difficult to obtain now than in the past, said Cleve Gaddis, a Realtor with Remax Around Atlanta Duluth. Buyers just aren't willing to purchase a home right now.

"I think the mentality is they're waiting for it to get even better," Gaddis said. "You might have found the home you want, but you might think something better will be coming next week."

Gaddis said he thinks incentives will continue to get better in some of the county's less-desirable areas, but they're unlikely to improve in the most popular places to live, many of which don't offer incentives anyways.

Stadler-Perry said she believes the bottom has already hit and now is the time to buy.

"I think one of our problems is we have information overload," Stadler-Perry said. "If you read or watch the news there's still people saying the market's going to crash and we're going to have rock-bottom prices. That's not going to happen."