Builders Facing More Challenge Selling New Homes

Builders across the nation are once again using whatever tactics they can to sell houses. Sure, lowering prices has been one method. I’ve seen various examples, such as a local builder taking about $20,000 off the price of a condo without any hesitation. Even in the Boulder real estate market, and certainly to a greater extent in the surrounding communities. Did you read my post about discounts at the Boulder condos at The Peloton?

In the one particular case referenced above, the condo was two weeks away from its scheduled close date, (the date the papers get signed and the new owner takes possession) but the buyer backed out. I showed this community to one of my buyer clients, and it was a great fit. The condo met the needs and wants of my buyer, and the clincher was that the builder was happy to offer a price reduction equal to the on-paper cost of all the upgrades the previous buyer had optioned into the property.

On a national level we’re seeing builders help with mortgage rates that start low, help with down payments and zero out of pocket expenses. Some of these things are reported to have fueled the national housing ‘bubble’ before it went bust — according to an article by Dawn Wotapka in the Wall Street Journal.

Builders like Lennar Corp. are offering graduated interest rates in some communities, starting as low as 2.88% for the first year — 2.88% for the second — then a slightly higher rate that locks in for the remainder of the term.

I just hope that if you are considering one of these options, you’ll look carefully at the final rate when you consider your personal financial situation and your ability to make those payments in years three and beyond. This ‘teaser’ rate approach is exactly what got many people in trouble.

Some have called the problem ‘predatory lending’ but I also think that many out there in trouble now just didn’t think that interest rates would change much, and some people also believed they could just easily refinance. There are multiple reasons for the changes and troubles in the lending marketplace.

My advice, let’s look carefully at your loan product and be sure that you can handle the worse-case scenario before you sign up for a loan. With builders in many communities sitting on inventory, especially in the eastern parts of the front range communities, you may have some success negotiating a fairly decent price when compared to the prices from just a couple of years ago. If you compare the currently advertised prices in many new home communities, you may find that they are already lower than just a year ago. This could work well for you if you want to be in a new home community, especially if you have good representation and help from a Buyer’s Agent.

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