For pretty much every housing market across the nation, the days of sticking a sign reading “Coming Soon” on an empty lot and selling out a community in a matter of days are over. From giant billboards flanking busy metro corridors to full-page ads in Sunday newspapers, builders are dusting off their oldest sales tactics to stave off rising interest rates and sliding absorption rates.

But as strings-attached deals like “Zero down! Zero closing costs! Zero payments for six months! Zero moving cost! Zero cost options!”—as reads a recent D.R. Horton ad in the Bay Area—become more aggressive and prolific, there's industry concern that the ads are harbingers of hard times.

Echoes of new incentive offers have public builders, in particular, under the microscope. Year- and quarter-end conference calls close with demands for the top-line take on incentives. Management is caught in a Catch-22: Conceding incentive tactics breeds fears about margin erosions while denying them fuel doubts about turning inventory and hitting sales goals.

Most of the bigs have opted to say little, quietly leveraging incentive offers in select markets to close out straggling units or project phases. The investment community recently applauded KB Home and Pulte Homes for sticking rather hard and fast to this philosophy.

INCENTIVES INVADE MARKET: With the market softening in some places, many builders are sweetening deals by throwing in discounts and bonuses. However, it appears the recent hype over the number of incentives coming on line has leveled, as Fitch Ratings senior director Robert Curran suggested in his conference call on April 10: “I think for the moment [the use of selling incentives] has plateaued.”

A recent Wachovia Securities' Neighborhood Watch Survey underscores that observation. The report states that in March, 57 percent of sales managers surveyed report that the value of incentives offered is the same as a year ago while the percentage of those that say the value is greater than a year ago dropped 6 percent from February levels to 33 percent of respondents.

However, as individual market dynamics morph, incentive hot spots will flare, forcing builders big and small to take different measures to hit their targets. But for the moment, a shakedown of what's happening on the incentive front in some of the hottest markets in the country leaves a sketchy picture, void of heavy trend lines.

WESTERN WEAR The Wachovia survey reports that Las Vegas, Northern California, and San Diego experienced the greatest incidence of sales managers offering a higher level of incentives than a year ago. Tim Sullivan, president of real estate advisors Sullivan Group, agrees, adding that it's not just been an uptick in incentives in California. Some parts of Southern California are experiencing price corrections, but they are “not across the board,” he says.

Sullivan Group senior vice president Peter F. Dennehy says the area's condo market, especially in San Diego, has been particularly sensitive to incentives. Beginning last year, he says an oversupply led to price credits on select projects. He's hearing about 10 percent price reductions but says it's a result of being “overvalued by that percent.” However, Dennehy reports several big incentive offers are floating about. One of them makes a tempting offer with a buy-a-condo-win-a-car promotion.

But SoCal is hardly the only California market under pressure. Pamela Richard, another vice president with Sullivan Group, says parts of Northern California also are undergoing price reductions to a degree, although she stresses that “it's very spotty.” She points to the East Bay and San Ramon areas as places where competition is heating up. Richard says a popular builder incentive item is offering buyers a year of paid HOA fees. And there's no doubt that “broker co-ops are back,” as well as negotiations on higher priced homes, she says.

Learn more about markets featured in this article: Las Vegas, NV, Denver, CO.