IN January the hook was 2 percent financing for six months. In February it was home entertainment and security systems, air conditioning, furniture packages, upgraded appliances and more.Now the lure: $14,000 Saturns.
Trying to generate sales in a depressed market, Schuler Homes Inc. is offering the free cars to buyers at a single-family project in Maile, where the homes start at $199,000. For its other projects, Schuler is offering comparable enticements.
The aggressive marketing practices underscore the lengths some builders are going to in order to attract customers, especially in Leeward and Central Oahu.
Watt Homes, for instance, is dangling up to $50,000 worth of incentives -- a level that would have been unheard of several years ago -- for selected homes in its Aeloa project in Kapolei.
Yes, it's a buyer's market, all right.
With so many homes available and the pace of sales so sluggish, developers are antsy to strike deals. Buyers wield clout at the bargaining table that they haven't had in years.
The best deals, though, go to consumers who know what to look and ask for, experts say.
So if you're in the market for a new home, or just considering it, here are some tips gleaned from builders, analysts and others. The tips are intended to get you the most house for your dollar:
The best deals usually involve the last few homes in a phase or the ones that have sat the longest -- completed but unsold -- in a builder's inventory.
The cliche "time is money" really hits home in the building industry, and the longer a developer can't sell a completed home, the quicker his profit is eroded.
For a $200,000 home, the cost of maintenance, security and debt service -- interest paid on the loan used to build the home -- can amount to about $50 a day or $1,500 a month, builders say. Multiply that by dozens of unsold homes and profits can shrink quickly.
"Those costs can eat you up, so you try to turn over the homes as fast as you can," said real estate consultant Kenneth Chong, who spent 26 years with Kaiser Real Estate Services and Bedford Properties.
What's more, a builder usually has specific sales goals pegged to the construction loan, and if those goals aren't met, the developer could suffer repercussions, including having to pay a premium for subsequent financing.
In some cases the builder already has paid the construction loan by the time the last few homes are completed, so proceeds from those units typically are pure profit or cash flow. That means developers usually have more flexibility to negotiate deals for those homes, which works to a buyer's advantage in a depressed market.
But Rick Hobson, sales and marketing director for Gentry Homes, cautioned about buying in a project with too many unsold homes. If there's excess inventory, Hobson said, someone who buys now could see prices fall later as the developer tries to sell the remaining homes.
Bargains can be had with homes that are sold and then fall out of escrow while under construction. Developers are more apt to deal the closer the homes near completion. The last thing the builders want is to see their standing inventory -- and the associated carrying costs -- grow.
Price breaks or better incentives often are offered for homes sold even before the models are built. At Alii Cove in Ewa, Gentry Homes gave its pre-model buyers roughly $10,000 discounts, according to Hobson. Schuler is offering $7,000 worth of closing-cost credits for presales at the Classics, a single-family project in Waikele.
Buyers generally can get better concessions by asking for things other than price breaks, said Nick Ordway, a University of Hawaii real estate expert. Although price can be a negotiable item in a depressed market, builders tend to reduce price only as a last resort, if they're willing to do it at all.
That's because price drops would affect all future sales and appraisals in that project, plus upset the previous buyers who paid the higher prices, Ordway and builders said.
Instead of asking for a reduction, Ordway suggests seeking other concessions such as closing-cost credits, below-market mortgage rates, appliance and carpet upgrades, landscaping, fencing, you name it.
"Anything but price -- the sky's the limit right now," said Realtor Mike Pang. Besides, today's prices usually are already discounted to reflect the slow market, builders say.
Builders with publicly traded stock, such as Schuler and Castle & Cooke Inc., tend to have additional pressure to sell standing inventory because of the potential negative effect that inventory could have on their earnings and stock price, said Richard Dole, an analyst with Fry & Co.
Indeed, the earnings of Schuler and Castle have suffered during Hawaii's real estate downturn. And Castle is projecting that 1997 sales for the company will be even less than last year's, hurting earnings.
Both builders have aggressive incentive programs, though Schuler's is considered among the most aggressive.
Developers of slow-selling condo projects often offer the biggest relative concessions. Unlike single-family projects, where homes can be built as demand warrants, spreading the financing over phases, all units in a high-rise condo are completed at the same time.
If demand is sluggish, the condo developer, faced with interest on the full loan for the project, usually has to offer significant concessions to sell the rest.
For both single-family and condo purchases, however, the amount of concessions given by the developer can affect how much a buyer is able to borrow for a mortgage.
If the value of the concessions goes high enough, that can trigger a cap on the loan amount.
Despite such limitations, buyers clearly have the upper hand in today's market, especially with so many homes to choose from, experts say.
Buyers, after all, can play the ultimate trump card: "They can walk away from the house if they don't get the price or amenities they require," UH's Ordway said.
