Home buyers across the U.S., take heart: 2006 is shaping up to be your year.

As the real estate cycle gets put on cool, the balance of power is shifting from the seller’s corner to the buyer’s. And homebuilders are responding with plenty of perks, especially in areas like Las Vegas and San Diego, where there is a lot of new home construction and where there is not much diversity in what is being offered, said Nicole McAllister, director of development, for the Lusk Center for Real Estate at the University of Southern California.

“Buyers ought to do alright this year,” agreed Stephen Melman, director of economic services at National Association of Home Builders, a Washington, D.C. trade group which surveys developers on the use of incentives.

Oh, the power!
What are buyers doing with their newfound power? They are demanding – and getting – bargains and upgrades. These include:

New kitchen cabinets;
Granite countertops;
Center kitchen islands;
Backyard landscaping;
New stainless steel and upgraded dishwashers, microwaves and refrigerators;
Upgrades to commercial ovens;
Built-in microwaves;
Upgraded flooring, such as bamboo; and
Chances to win something, such as a car.
Roughly 40% of developers are saying yes to these cosmetic perks, and that’s double the number from six months earlier, according to a December NAHB survey of more than 500 homebuilders.

Witness the following:

In Georgetown, Washington, D.C., a 63-unit condominium project is offering financial incentives, such as requiring only $5,000 down to cover closing costs and down payments to move into a $409,000 condominium. In January, they offered a $7,500 blank check, and suggested buyers use it for a flat-screen TV.
In Sacramento, Calif., new developments from Meritage Homes Corp. of Scottsdale, Ariz., offer the “Done Deal,” program, which gives buyers $20,000 to $90,000 worth of incentives that can be packaged in various ways, such as $15,000 in backyard landscaping or reduced closing costs.
In a new master-planned golf community near Las Vegas called Tuscany, anyone who visits a model home built by Rhodes Homes is eligible for an all-expense-paid weekend trip for two to Cabo San Lucas, Mexico. The builder said the contest helps attract traffic to its developments and boosts sales.
New homeowner Debbie Wilson knows the benefits firsthand. She scored $10,000 worth of perks that included upgraded kitchen counter tops and reduced closing costs on a $375,000, three-bedroom home in Northern California. Wilson, who is an administrator at the University of California at Davis, said the package helped her afford her 1,560-square-foot, three-bedroom home.

“I’m still amazed,” she said.

Don’t be blinded by sparkly extras
Many of the cosmetic extras being offered are often products builders can get at cost. Rarer are financial incentives, like Wilson’s reduced closing costs, interest-rate buy downs and cuts in home prices. These packages can cost a builder more, but still are being used as carrots by roughly 7% of developers, nearly double the amount from six months earlier, according to the NAHB survey.

Which should buyers go for? Financial planners say while it’s fun to show off granite countertops and built-in microwaves, in the long run, financial incentives will provide the bigger payoff. A reduction in price, even small, will mean lower property taxes and lower monthly payments. A reduction in interest rates can pay off big over time, said Dirk Huybrechts, a certified financial planner in Los Angeles.

“Upgrades – frankly all they do is depreciate,” said Huybrechts. “You want to look closely at the numbers. Remember, you can always upgrade your appliances later yourself.”

The power of perks
Builders have historically used incentives in other tough housing markets, such as the early 1970s when interest rates were high and the early 1980s when the economy was struggling, said McAllister at USC.

“It works,” said McAllister. “Builders don’t want to have inventory standing, and they will do what it takes to move product. Buyers like perks because they feel like they’re getting a good deal.”

New homeowner Wilson can attest to that. “I would have never even looked at the home without those incentives,” she said. “It was a blessing.”

Developers are more likely to offer incentives to move product if they have a back-up of inventory, or a home has fallen out of escrow, or if it is a sluggish time of the real estate cycle, such as January and February.

“Builders are fighting for their markets in some areas,” said Melman, of the NAHB. “They are resorting to their arsenal of marketing tools, and some of those include giving buyers some perks.

“It’s a win-win. It’s an excellent way to move property and get buyers loyal to a certain builder"Debora Vrana

Encompass Realty, www.encompassrealt.com, Arizona Real Estate

Sales of existing homes were down in January while home prices continued to appreciate at double-digit rates, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – declined 2.8 percent to a seasonally adjusted annual rate1 of 6.56 million units in January from an upwardly revised pace of 6.75 million in December. Sales were 5.2 percent below the 6.92 million-unit level in January 2005.

David Lereah, NAR’s chief economist, said sales are tracking the trend in the association’s Pending Home Sales Index. “Our leading indicator, based on pending sales, has been trending down since hitting a record last August,” he said. “In the wake of interest rates peaking in November, I expect we are in a bit of a trough that may be followed by a modest rise and then a general plateau in the level of sales activity. Existing-home sales should stay below the record levels experienced over the last two years, but they’ll maintain a historically high pace.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.15 percent in January, down from 6.27 percent in December; the rate was 5.71 percent in January 2005. In November, the 6.33 percent fixed rate was the highest in over three years.

The national median existing-home price2 for all housing types was $211,000 in January, up 11.6 percent from January 2005 when the median was $189,000. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Thomas M. Stevens from Vienna, Va., said home prices continue to show the long-term effects of tight supply. “Although housing inventory levels have been improving, it is far from being a buyer’s market in most of the country and we see the momentum of double-digit appreciation being sustained in home prices,” said Stevens, senior vice president of NRT Inc.
“Even when home sales slow, they still supply solid returns. The longer you own, the bigger the gain.”

Total housing inventory levels rose 2.4 percent at the end of January to 2.91 million existing homes available for sale, which represents a 5.3-month supply at the current sales pace.

Single-family home sales dipped 1.5 percent to a seasonally adjusted annual rate of 5.77 million in January from an upwardly revised 5.86 million in December, and were 4.8 percent lower than the 6.06 million-unit pace in January 2005. The median existing single-family home price was $210,500 in January, up 13.1 percent from a year earlier.

Existing condominium and cooperative housing sales declined 10.6 percent to a seasonally adjusted annual rate of 791,000 units in January from an upwardly revised level of 885,000 in December. Last month’s sales activity was 7.8 percent below the 858,000-unit pace in January 2005. The median existing condo price3 was $216,900 in January, up 5.5 percent from a year ago.

Regionally, existing-home sales in the South rose 2.6 percent in January to a level of 2.75 million, and were 1.9 percent higher than a year ago. The median price in the South was $178,000, up 5.3 percent from January 2005.

Total existing-home sales in the West declined 3.5 percent to a pace of 1.37 million in January, and were 14.4 percent below January 2005. The median existing-home price in the West was $310,000, up 11.5 percent from a year ago.

In the Midwest, existing-home sales dropped 7.7 percent to an annual pace of 1.44 million in January, and were 3.4 percent below a year earlier. The median price in the Midwest was $167,000, up 12.1 percent from January 2005.

Existing-home sales in the Northeast fell 10.0 percent to annual sales rate of 990,000 units in January, and were 13.2 percent lower than January 2005. The median price in the Northeast was $253,000, which is 9.5 percent higher than a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.

February 27, 2006 - Sales of new single-family homes fell 5 percent to a seasonally adjusted annual rate of 1.233 million units in January following upward revisions to the November and December rates, the U.S. Commerce Department reported today. The January sales rate was 3.3 percent above a year ago.

“After a record-setting sales pace in 2005, home builders are seeing an orderly cooling-down process as the supply-demand balance shifts and buyers gain more leverage,” said David Pressly, president of the National Association of Home Builders (NAHB) and a home builder from Statesville, N.C. “While many builders are now offering more sales incentives to adjust to this changing environment, housing demand continues to remains quite healthy by historical standards.”

The inventory of new homes for sale rose slightly in January to a record 528,000 units from 515,000 units. The months’ supply at the current sales pace rose to 5.2, the highest since late 1996.

“With sales volume off, the inventory level has edged higher, but this rise is nothing to be alarmed about because the fastest growing component of the inventory run-up relates to homes that have been permitted but not yet been started, which jumped 60 percent from this time last year,” said NAHB Chief Economist David Seiders.

While the weather across the nation was very mild in January, Seiders noted that this was essentially a non-factor in the new home sales report. “There is little statistical relationship between home sales and weather, unlike the strong relationship between weather and housing starts. Therefore, any inference that sales numbers were actually weaker than they appeared because the weather was so good just does not hold water,” he added.

Sales fell across three regions in January, down 14.9 percent in the Northeast, 10.8 percent in the Midwest and 10.3 percent in the South. In the West, sales were up 11.3 percent.

“NAHB’s forecast continues to anticipate a decline of roughly 7 percent in new-home sales for 2006 as a whole, essentially returning to the healthy 2004 level,” said Seiders.

Encompass Mortgage LLC, www.encompassmortgage.net, Arizona, Mortgage Company, Arizona mortgages, residential loans, commercial loans