Pete Montero first listed his Ann Arbor, Mich., 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 now asking $329,900 — and he’s even 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 to ensure privacy.
Spring is typically the busiest time of the year for home sales. But with mortgage rates rising and sales slowing, 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. The inventory of available properties has increased,” said Martin Bouma, an Ann Arbor real estate agent. “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 a year’s worth of alarm service. 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 of wooing buyers.
The tempered pace of home sales in recent months follows record years of activity — 7.982 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 ebbing in 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 counter offering.”
More time on the market
The process of selling a home, meanwhile, is taking longer, a trend reflected in heightened demand for lengthier 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 could be sold quickly. Now, borrowers ask for 120-day rate locks.
While some homes can be taken off the market place by their owners, home 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 Corp., a Denver-based builder. “Incentives are an important part of our business,” but Reese is quick to note, “we’re not doing any fire sales.”
Dallas-based Centex Corp., 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 firm, Neil Devory, said the 12-hour sales have “tremendously increased traffic,” but he would not disclose exactly how many sales actually 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, the Horsham, Pa.-based home builder’s chief marketing officer, 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,” said McCarron. “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 as a reminder of a good school district.
In addition to personal notes and school jerseys, Toll Brothers’ marketing involves staging Easter egg hunts, Halloween parades as well as 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,” said McCarron.
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.
Maria Janeidas, an information technology consultant based in Manhattan, looked at about 24 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.
Donna Prudenti, a Plandome, New York resident, decided in March to hold off from buying a home, just months after she sold her home. She’s 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.