New construction: builders are giving it away

Last week I closed a sale of a new townhome for one of my buyers. The builder needed/wanted to keep the sales price as high as possible. Knowing this I was able to negotiate 2 years of free HOA's, and some interest-free financing, as well as a very low sales price (lowest ever sold p/s/f).

A few days after closing there was a very appropriate article in the WSJ by Dawn Watoapka titled "Builders Get Creative to Sell Homes". Some excerpts: "Highlighting their desperation to sell houses, builders are bringing back the gimmicks -- mortgage rates that start low, help with down payments, zero out-of-pocket expenses -- that helped fuel the housing bubble before it went bust. The larger builders have loan subsidiaries, where they can pay down the rates and eliminate fees. Builders, trying to survive the worst downturn since the Depression, must move inventory quickly to bring in cash. But they promise they're being responsible by scrutinizing income and credit scores and making sure loans don't reset with unbearable payments. Most industry watchers aren't worried. To them, this is simply the latest batch of incentives - this round inspired by the heightened lending restrictions - necessary for business, even if they stress already-razor-thin margins. Builders don't hold their loans -- they are usually resold to larger mortgage companies that pool them for resale to the secondary market -- and what few loan buyers remain have no tolerance for risk."

One last thing about new construction. Be careful about being one of the first buyers, if the builder can't sell the rest of the units, you'll be stuck owning a home with a bunch of renters.