RISMEDIA, Nov. 8, 2007-(MCT)-Facing a tough market for selling new homes, Pacific Union Homes tried a new tactic last month — buy one home, get 1/52 of a second home for free.
After months of cutting prices and offering increasingly generous incentives at its four Central Valley communities, with less-than-expected success, the Danville-based home builder decided to up the ante by offering new home buyers a week per year at a timeshare home in Hawaii, Florida, Mexico or another vacation location.
“The chance to say, ‘that sounds fun, that sounds interesting,’ it gets you a little bit of extra attention,” said Robert Stankus, a marketing consultant for the builder.
Apparently the timeshare offer did the trick. The company sold about 22 homes at its “Claremont Collection” communities in Tulare, Porterville, Atwater and Oakdale over the two weekends it offered timeshares to new buyers, Stankus said — about the same number of homes sold in the past two months at the same developments.
With home sales and home prices falling across the country and the Central Valley, home builders are increasingly turning to more esoteric incentives to lure buyers.
The offers range from free cooking demonstrations by celebrity chefs to auctions of new homes and promotions like Pacific Union’s timeshare giveaway. One home builder with projects in Chowchilla and Coalinga recently offered a free Nissan Altima sedan or Xterra sport utility vehicle to anyone who purchases a new home.
“Cash discounts, upgrades, free pools — those kind of things are just something for the builder to differentiate themselves from the builder down the block,” said Mike Prandini, president of the Building Industry Association of Fresno and Madera Counties. “These incentives are just a way to get people to come through the door. That’s probably going to continue while the market’s weak.”
That’s certainly the case in California, where September home sales across the state fell to 20-year lows, according to the California Association of Realtors.
The San Joaquin Valley has been no exception to the statewide trends, and some Central Valley counties have seen even steeper home price declines, according to real estate research firm DataQuick Information Systems.
Builders “are in a down market, and they recognize that,” Prandini said. Growing problems in the subprime mortgage market have made it particularly hard for builders aiming at the first-time home buyer, since tightening credit standards have increased the cost of getting into a new home, he said.
At first, home builders resisted lowering prices and offered incentives like offering to cover closing costs and helping new buyers secure low-interest loans.
Eventually, however, builders started cutting prices. But that on its own may not be enough to boost demand, said Robin Kane, a real estate market analyst in Fresno.
“You’ve got a consumer who’s a little jaded in terms of many other retail sectors offering some form of incentives, so the consumer comes to expect it,” he said. “People need an emotional rationale sometimes to make an economic decision. The attraction of a new car or a trip can become a way to knock people off the fence.”
Still, “for a builder, it’s not going to make up for an overpriced house,” Kane added. “All things being equal, these offers should not be anything more than icing on the cake.”
Stankus agreed that Pacific Union’s timeshare offer probably wouldn’t have done as well as it did if the builder hadn’t also offered lower prices and other extras.
“We’ve been screaming price cuts for the last six months,” he said. “We did a free pool, we did some low-interest rate financing deals.”
All those offers “created little blips” of interest from buyers, he said. But against the backdrop of falling home prices and growing backlogs of unsold homes, Pacific Union found their offers were being drowned out by competitors.
“To get anyone’s attention, you have to shout pretty loud,” Stankus said. The company’s “full-court press” of marketing for its timeshare offer included direct mail, radio, newspaper, television and e-mail advertising, he said.
Of course, Pacific Union’s offer was accompanied by some “pretty steep” price cuts, Stankus said. In the past year, the builder has slashed prices in its new Central Valley subdivisions by $70,000 to $125,000.
The builder did honor the wishes of some buyers who didn’t want a week’s timeshare, but did want the cost of it deducted from the price of their new home, he said. But such requests were rare, he added.
“There are some people for whom wrapping something like this up in a house is the only way they’re going to get it,” he said of the timeshare offer.
Copyright © 2007, The Fresno Bee, Calif.
Distributed by McClatchy-Tribune Information Services.
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