The Centex 9-MONTH Sale
It's been over nine months since Centex made waves with its then unique "12-hour" sale that featured six-figure discounts. Unsurprisingly, it looks like those "one-time" discounts have morphed into lower prices. From the San Francisco Chronicle:
Home builders, who have been riding the crest of the housing wave for much of the past decade, now find themselves in the trough. With many more houses on the market than there are buyers for them, builders are slashing prices and offering perks from free granite countertops and hardwood floors to paid vacations to Hawaii. In Sacramento, Centex Corp. has slashed home prices by about $100,000, bringing down the average price of its new homes to less than $400,000.Hat tip: Bay Area Housing Bubble blog
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[T]he extent of cancellations, price cuts and incentives in the Bay Area market is far less than in other parts of California, such as Sacramento, and many other cities around the country, said Keitaro Matsuda, senior economist at Union Bank of California.
"Our economic fundamentals are stronger and the amount of excess supply is much, much smaller," Matsuda said. "That tends to be the case because it is much harder to get permits and start building something here."
That's not the case in Sacramento, where developers say that price cuts have been much more dramatic than anyplace in the Bay Area. The average price of a home has fallen by about $100,000 to the high $300,000-range at Centex Homes developments in Sacramento, said John Ochsner, Centex's executive vice president of the Northern California region.
"Buyers over there are demanding price reductions and incentives and we're responding to that," Ochsner said. "We're backing off on our starts because we do want to control our inventory there. Buyers have all the power at the moment."
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Even with the slowdown, builders still have projects in the pipeline that are entering the market. Instead of offering incentives for their newest homes, builders say, they are simply asking for less money.
15 comments:
The market thought that the housing sector was bottoming out, when it really isn’t
Sale? This is great! Imagine the FB next door. I'd be pissed. No, I'd wouldn't, I'd be stupid to have bought at the top, maxed out in an option ARM that resets next year as the market further plunges.
Centax's New Marketing Campaign?
12-Year Sale!
Out of the mouths of babes...and homebuilding presidents! There you have it: 20% price reductions occurred in 2006.
When you combine that with the 20% reductions coming in 2007, we will be close the bottom. The 2000 SF home will be $240,000 or so. This will equate to a 3% appreciation rate since 1999, right in line with wages.
And since we became so overpriced, values may drop through that floor for a while as all the Flippers continue to get burned badly and exit. No one wants to own real estate anymore.
There will be no appreciation in home prices for 10-years in Sacramento....until 2014....just like 1990 thru 1999. Zero. Zilch. Zip. Rental properties will pay a bigger price, because now they must have large POSITIVE cash flow, or they just sit unsold. Negative cash flow is out. There is not appreciation, since values are dropping, so it is the only compensation. Otherwise, smart investors are going to T-bills and stock equities.
Centex in Woodland seems to be doing better. I think they've sold about 75% of their homes to date. Granted, they've offered fianancing deals and incentives, but the starting prices haven't moved too much (I think at one point, it was $50-70K off, but not sure if that's still there). The one beef I have w/ Centex there is that they do not disclose the mello roos fees for Spring Lake, which is $223/mo. So I wonder how many of those that bought are aware that they will have this fee for the next 40 years? KB Homes gives that full disclosure as soon as you walk through the doors.
So very soon in polite society it will be fashionable to ask:
" Are you a TOP or a BOTTOM " ?
( did you buy at the top/bottom )
of course that what I meant ... !!
jr...
I disagree that a 2000 sq ft house in Sacramento will ever be $240K. My rational - population growth and Bay Area migration. Sacramento is _still_ the cheapest large city in California.
Anon 11:05,
Yes it is very hard to fathom. But a nice 2200 SF home just sold for $330,000, and people said they would never see $150/sf again.
I can show you hundreds, even thousands of 2000 SF homes that sold for under $240,000 in 2002. We can revert to that level very easily. Using an inflation adjustment of 2.5%/year, that means a 2000 SF house that sells for $272,000 has experienced on real appreciation. That is $135/SF. We are at $150/SF for new homes from the builders right now, and dropping rapidly.
You are correct in that I may be a bit off....but consider that $272,000 is equivaltent to $240,000 in 2002. We are getting there very quickly.
People are very quick to accept the reality of 100% appreciation over a few years, but they seem to get bogged down when it turns to 50% depriciation. It is all the same, just opposite directions.
Take a look at my market history & forecast report for Bakersfield, Los Angeles & Modesto at
http://homepricehistory.blogspot.com/. The Sacramento report will published in a few days, along with a new city every day.
Large builders like R**** & B**** an C********** are having cash flow trouble.. I just spoke with the owner of one of the larger stucco contractors in bubble land- Several builders are seriously in arrears on draws owed for completed homes. Many builders are telling subs to reduce bids by 20% or be fired..
- A Superintendent...
I believe that it is entirely possible that the price for an entry-level home in a decent, liveable area could drop to the mid 200's. In the areas that I would be interested in purchasing, prices have already dipped from the 400's to the low 300's, and I'm expecting them to keep dropping through 2007 based on my research and the opinions of professionals that I trust.
My purchase range is in the high 200's, and I have an above-average income. I also do not want to go back into consumer credit debt, and I want to save and invest some money, and frankly am only willing to put about 1/3 - 1/2 of my take home pay into a mortgage.
I'm not interested at all in a newly built home, but when people sell their very solid and well-maintained c.1940's to 1960's homes to move to Cookiecutter Village, the lower prices there will put pressure on prices to stay lower where I want to buy.
I'm watching the market closely, and this blog is a big help. Meanwhile, I'm renting a very nice place that I could positively not afford to buy, and putting quite a bit into savings. I'm also keeping an eye on the rentals being offered, and frankly, I could rent an even nicer place for less but I dislike moving and it's not enough less to overcome my inertia.
We bought a new 2800 sq. ft. retirement home here in the Sterling Ranch development in Denair, Ca. back in 2004 for $335,000.00. Being (BATS) Bay area transplants in transition, this price was nominal, at best. We were amazed that just one block away this other developer was building million dollar estates on Jeffrey Court, and people were buying them.We remain having a foot in Niles, Ca. being are primary home has been there for 18 years, Real Estate is no different than any other investment, you should diversify your holdings, Alameda County, Stanislaus County, Contra Costa County, Etc. We're not selling nothing, we love our houses, and communities. This is Only a correction, this will weed out the people who shouldn't never qualified for these exotic mortgages in the first place, and these Real Estate vultures will reap the rewards.......
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