This coming President's Day weekend, several public home builders are hoping to move spec inventory and capture revenue before the end of 2008's first quarter.
In Northern California, Central Valley, Sacramento and Reno, Centex Homes is promoting Centextravaganza. Prices at all 15 D.R. Horton communities in Northern California and Nevada will be dramatically reduced from 2007 prices. And in the Southern region of the state, through its "un-auction" sale, Horton is already touting savings up to 50% off seasoned spec inventory.
But while public builders like try to move houses by dropping prices during the spring selling season, Epcon Communities is spurring sales with the addition of two new buyer incentives that target today's sticking points in the home buying process: a 4.75% mortgage for both the buyer and the buyer's buyer and a lease-to-own option.
"We need to be responsible with our pricing," said Nanette Overly, vp of sales and marketing for Epcon, in a meeting with Big Builder on Thursday at the International Builders' Show. "Not just because we are a business and need to maintain financial integrity, but because of our residents. How do we look at them and take cuts with no consideration to their equity?"
In 2007, the Dublin, Ohio-based company, which has a residential construction franchise model with product targeted for active adults, closed 1,798 homes, down nearly 40% from the peak in 2006. But according to the company's own sales team, the implementation of a new loan program in conjunction with mortgage partner Chase may have those sales numbers quickly climbing back into record-breaking territority.
At a meeting held in early January, management posed a question to the company's 130 sales professionals regarding interest rates: 'How many additional sales could you write this year if we could get you this rate--4.75%?' The response was virtually overwhelming. "Our own people told us [collectively] that they could capture 1,596 additional sales if we could offer a rate of 4.75%," said Overly. "So that's what we did."
In essence, Epcon committed to buying down the traditional 30-year mortgage loans from rates approaching 6% down to 4.75%. And in an effort to help prospective buyers move their existing homes, Epcon and Chase are also extending the rate through the process by making it available to those who would buy their customers' homes.
"Our sales consultants are going back through our lead lists and contacting people who spoke to us about the need to sell an existing home," she said. After implementing the initiative just four weeks ago, Overly added, mortgage applications are already up by roughly 40%.
In another effort to aid with buyer challenges, the company just initiated a lease-with-the-option-to-buy program in its Central Ohio marketplace. Under the terms of the program, the home must close within a 12-month period. The effort garnered six participants in its first month and is now offered as a part of the builder's program in all markets.
"There are a lot of people in transition right now," said Overly. "It's driving the need to be flexible and to help buyers get through the process in new ways."