Incentives, to Fight the Doldrums

DEVELOPERS in central Long Island are increasingly resorting to incentives to lure buyers. Nassau and Suffolk Counties are both affected, though new units in western Suffolk have been particularly slow to sell in the current sluggish real estate market.

“We’re concerned, so we’ve reduced our prices,” said Elliot Monter, whose development firm, Holiday Organization, builds the Hamlet Estates gated communities on Long Island. He is cutting prices on some of his newest homes in St. James, in Suffolk, by 20 percent, though he won’t be lowering them at his newest Nassau County development, in Jericho.

Potential buyers at the Hamlet Estates at St. James, on Route 347 at Moriches Road, will be introduced to a new scaled-down 3,300-square-foot model; the eight other models all start at 4,000 square feet. Prices will be scaled back, to $795,900, or 20 percent lower than the starting price of $1 million for the bigger models.

In addition, 22 of the larger homes, as yet unbuilt, have been reduced by $100,000, or about 10 percent, Mr. Monter said. Those homes now range from $908,000 to $1.045 million.

During one October weekend, Pulte Homes of New York, which is building six communities in Suffolk County and two in Nassau County, offered incentives worth as much as $50,000 to buyers reserving homes. The communities range in size from a condominium development in Oceanside with units starting at $364,900 to a single-family-home development in Mount Sinai with prices starting at $625,000.

Most of the incentives are tied to the company’s mortgage arm, the Pulte Mortgage Corporation, according to Bruce Orr, vice president for marketing of the Long Island division.
They include covering closing costs, upgrades on home features and “living free for six months” — which means the company pays buyers using Pulte financing an amount equal to six months of mortgage payments and taxes.

That strategy gives buyers breathing room when they have to sell their current home to buy a new one. It also reduces the impact of tighter home financing restrictions, Mr. Orr said, adding, “When we can control the financing side of the business, we have a much higher likelihood of getting the buyer to the closing table.”

According to Pearl Kamer, chief economist for the Long Island Association, builders’ incentives will most likely continue “for some time to come,” especially with homes priced from $750,000 to $1.2 million lingering longest on the market.

In that price range, Dr. Kamer explained, buyers often need “jumbo” mortgages, which exceed $417,000 and are not guaranteed by the Federal Housing Administration. Investors are “shying away” from taking on the extra risk of those loans, she added, and banks raise interest rates for carrying the risk.

Creditworthy buyers in this range “can get a jumbo mortgage,” Dr. Kamer said, “but only at an exorbitant interest rate.”

In Suffolk, the time spent marketing a house for sale was 23.9 percent longer in the third quarter this year than for the corresponding period last year, according to Jonathan Miller, executive vice president and director of research for Radar Logic, a real estate data analysis company. [ Read more ]

Source : nytimes