Whoa, whoa. You go away for a weekend and it gets turned into not speaking up?
I’ve been visiting new developments for over a year now and I am neither surprised or disappointed at the amount of traffic cruising through the models. I (fairly) obviously didn’t visit any this weekend, but I’ve been within the last couple of weeks.
I will definitely say traffic is up, but that’s compared to the last quarter of 2006. Traffic (to me) still seems down from this time last year and I saw heavy traffic at both 4S and Del Sur for good parts of last year. And to that I say so what? Here are the important things to note.
Traffic does not equal sales. I see some people taking what SDR posted and thinking that increases in traffic translates into sales. This is, of course, not necessarily the case. It’s all about conversions to sales and if this were direct mail, it would be a campaign that’s not doing very well. Sending 2 gabillion pieces instead of a gabillion pieces might help, but you still don’t really have a product that people are just dying to buy and at some point it’s the law of diminishing returns.
Most of the builders have standing inventory right now. Plain and simple, they have houses people could move in tomorrow and they’re still not selling them. Yes, they sell some, but they always will. And this is at a time when they’re controlling the heck out of inventory.
I always tell my wife that you can sell anything if the price is right. Simple market dynamics, right? The builders get this and have definitely adjusted prices accordingly. Pienzas are the exact same houses Fieldstone sold 18 months ago for $100K more. Another 4S development that just closed out called Garden Walk sold relatively well throughout 2006 because they lowered their prices ahead of the market. What I’ve seen is that the price reductions help for a little bit, then it stalls, and then the cycle repeats. I have seen nothing to make me think otherwise yet.
Also, make no mistake that simply having a bunch of relatively new developments come on-line (as 4S does right now) boosts traffic all by itself. It’s fun to look at model homes and it works so much better when there are a bunch of new ones all right together.
Finally, yes, in general, inventory is flat and sales are up a bit, but don’t kid yourself that even just 17K homes for sale isn’t a lot compared to the last several years and we still don’t know that it’s not going to pick up. Again, my feeling is that some of this sentiment (i.e. market recovery) will actually contribute to the inventory picking back up.
