Signs of Rebound Emerge as New Home Sales Rise : Real Estate: Consumers are looking to cash in on low interest rates and more affordable new home prices. Developers are offering an array of incentives.
During the summer, John Ashkar, president of Weston Development in Westwood, vowed to stand on his head if necessary to sell one of the 134 new homes built by his company in Port Hueneme.
Like other Southern California developers at the time, Weston was attracting more looky-loos than buyers to its Pacific Collection project. Ah, but what a difference a few months, or even a few weeks make. As of Monday, Weston had sold all but 10 of the 134 detached homes at the Ventura County site.
“Traffic has picked up in the last three weeks. People are now coming out with more serious intentions,” said Ashkar, whose Pacific Collection homes sell in the $200,000 range.
What caused the turnaround for Ashkar and other Southland builders?
Optimistic builders and real estate experts say the area’s market for new homes has finally bottomed out, fueled by move-up and first-time buyers looking to cash in on low interest rates and more affordable home prices. Nudging potential home buyers along are the builders, who are luring consumers with an array of incentives that are often outlined in their newspaper advertisements. That, and the perception among consumers that interest rates and home prices are rising, have combined to increase consumer traffic at new home projects in the last month.
In the San Fernando and Santa Clarita valleys, new home sales increased by 27% to 568 units in the third quarter ended Sept. 30, compared to the second quarter, according to the Meyers Group, a Los Angeles real estate consulting company. However, the third-quarter sales were still 18% lower than the same period in 1992, when 692 units were sold in both valleys.
In Ventura County, sales of new and resold homes increased 3% during the first 10 months of 1993 to 7,156, up from 6,921 units sold during the same period in 1992, according to a study by TRW REDI Property Data.
“Nowadays you still need incentives, offering upgrades or helping with the closing costs, to sell a home. We custom-make a deal for everybody who walks in. This wouldn’t have happened four years ago,” Ashkar said.
According to Ashkar, some custom deals include an agreement by Weston to help buyers pay for some upgrades, like landscaping, carpeting and a home security system. In some cases Weston will also pay between 3% and 6% of the closing costs, depending on the size of the buyer’s down payment.
Officials at Kaufman & Broad, the state’s largest home builder, said they expect to sell a record 6,000 homes in California and Nevada for the company’s fiscal year ending Nov. 30, up from 4,000 a year ago. “And most of our buyers are first-time buyers and move-ups,” said Eric Elder, K & B vice president of marketing.
He attributed the company’s success to its lower-priced new homes, which were made more attractive by record low interest rates during the summer. Buyers need only 5% down or less to move into a new Kaufman & Broad home. For some homes in the Antelope Valley, $6,000 is enough to cover the down payment and closing costs, Elder said.
The firm also had a recent marketing campaign that offered to make a home buyer’s payments for six months at some new homes in the San Fernando, Santa Clarita and Antelope valleys. Those homes ranged in price from $78,000 to a high of $200,000.
Elder agreed that the pool of new home buyers has increased recently, as consumers hurry to open escrows on new homes before interest rates and prices climb further.
“Buyers need a compelling reason to get out and see our homes,” he said. “Typically, we help with the closing costs or make the payments for you for about six months. This will usually leave you with enough money to do a number of things, like buying new furniture or landscaping.”
Lou Sudduth, sales manager at Canyon Park Village in Encino, an American Beauty condominium development, echoed Elder’s and Ashkar’s enthusiasm for a rebounding new home market. Sudduth said there are only 23 units left for sale, priced from about $135,000 to $200,000, from the original 240. The first units were built three years ago.
“Lately we’ve seen a tremendous upsurge in entry-level buyers. Right now I’ve got 20 families driving me crazy because they want to be in their new homes by Christmas,” said Sudduth.
Sudduth added that he is willing to make a “small concession” on price but is more inclined to throw in free appliances in order to close a deal.
“I really don’t have a lot of room to negotiate, but I don’t let anybody who is a sincere buyer out of my office until we can strike a deal,” said Sudduth.
Nima Nattagh, market analyst for TRW REDI, lauded the strategy of builders who are now focusing on building more affordable homes, opening the market for first-time and move-up buyers.
“This more than anything has contributed to consumer confidence. There has been a shift in favor of lower-priced homes. Incentives are helping, but the fundamental reason for the increase in new home sales is the builders’ new understanding of market forces. It’s harder to sell $400,000 and $500,000 homes these days,” Nattagh said.
“The decline in demand has slowed down significantly. . . . Southern California’s housing market may well have bottomed out,” he added. “The incentives offered by builders to new home buyers are helping level off the market, but the main factor has been the builders’ finally understanding that they have to concentrate on the cheaper end of the market.”
