Axel Koester / For the Times
IT ALL HAS TO GO: Standard Pacific Homes’ Diamond Ridge development in Victorville is one of the company’s 49 SoCal properties that are part of a “Mission: Possible” ten-day blowout home sales event.
Builders find interest low despite hefty incentives
By Andrea Chang, Los Angeles Times Staff Writer
September 15, 2007
It was supposed to be a blowout sale for home builder Standard Pacific Corp.
For days, the Irvine company has been touting its “Mission: Possible” extravaganza in 49 communities throughout Southern California, with bonuses for buyers totaling as much as $20 million. Standard Pacific is aiming to sell 200 homes by offering mortgage loans with rates of less than 6% and other perks, including a free 42-inch plasma-screen television with every home purchase.
But in Victorville on Friday, the blowout looked more like a washout. Only a trickle of potential buyers showed up on the first day of the 10-day event.
Like Standard Pacific, home builders around the country are hosting everything-must-go sales — complete with giveaways and promises of discounts so free-flowing that all homes would be unloaded in a weekend.
The stakes are high for builders. After a construction frenzy, they are faced with a swelling collection of unsold homes as lenders have tightened their standards and speculative buying has cooled. Last month was the worst August in 15 years for Southland home sales, and prices in most communities in the region fell.
To lure potential buyers, builders are offering extras such as free appliances as well as heavy discounts on home prices. Hovnanian Enterprises Inc., for example, is holding a Deal of the Century sale this weekend in 19 states, including California, with price cuts of as much as $100,000 and other goodies.
The sales promotions “show the builders are serious about moving inventory,” said Patrick S. Duffy, a principal at Los Angeles-based Metro Intelligence, a building industry consultant. “They’re trying everything.”
But the perks didn’t seem to be attracting much interest in two newly developed Victorville communities on the first day of Standard Pacific’s sale. Only a handful of prospects, although more than usual for a Friday, stopped by the sales offices of neighboring communities Diamond Ridge and Crystal Spring, which were decorated with colorful banners and posters proclaiming the event.
Inside one sales office, agents set out cookies, candy and bottled water for shoppers and chirped about a daily drawing for a $500 gift card. Outside, spiffed up the merchandise, installing windows, painting stucco and laying sidewalk.
“They’re beautiful homes, but there’s a catch,” said Tracy Davenport, 31, of Victorville, who viewed the sample properties with her mother, Frances.
Davenport, who owns a day-care center, said it seemed clear the agents were anxious to make a sale. Despite offers of $75,000 in discounts, mother and daughter left the sales event shortly after arriving.
“They’re desperate because they’ve got to make money,” she said. “They’re trying to get rid of them.”
The bonuses did impress some potential buyers.
“That’s a heck of an incentive,” said one woman as she rushed out of the Diamond Ridge sales office clutching paperwork.
The nationwide housing slump has made potential buyers wary of entering the market now, with many instead preferring to wait it out.
A few years ago, the housing market was pumped up by the availability of unconventional home loans that allowed many previously unqualified consumers to buy houses. To serve the flood of new buyers, builders quickly jumped on board. .
“They built toward what the demand was at the time,” Duffy said. “With the disappearing of the financing, what would have become supply-demand equilibrium now becomes overbuilding.”
To stay competitive, other builders are holding similar events this weekend. Hovnanian of Red Bank, N.J., is providing refreshments and live music at its Santa Clarita sale, where “bonus-boosting extras” for potential buyers include as much as $20,000 in incentives, a free refrigerator, washer and dryer, miniblinds and landscaping.
Standard Pacific, which did not return calls seeking comment, had been offering deep discounts even before the start of the sale.
The strategy worked on Julia Peña and her husband, who bought a home in Diamond Ridge a month ago after being offered $40,000 in incentives as well as a $10,000 reduction in the sale price.
Peña, a homemaker, said she didn’t know why the builder offered — unprompted — to cut the price of the five-bedroom home, “but I liked it.”
“They gave us a good deal,” Peña, 36, said. “We were so happy — it worked out for us.”
A month ago, Juan Ramirez bought a Diamond Ridge home for $388,000 after the builder offered him a free washer and dryer and $30,000 in incentives, which he used to upgrade the carpeting and tile in the five-bedroom home. Although the juice-bar owner was worried that the home’s value would decrease, it was too good of a deal to pass up, he said.
“You’ve got to take a chance to see what happens,” Ramirez, 40, said.
But others weren’t convinced. As she left the sale with her daughter, passing by a fence draped with a “Mission: Possible” banner, Frances Davenport expressed doubt that the builder would reach its goal.
“It’s an impossible mission,” she said. “They’re saying possible, but I think it’s impossible.”
