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Residential
Dallas

North Texas homebuilders seek ‘magic bullet’

Craft various incentives for would-be buyers as rate hikes crimp demand

As demand in North Texas fizzles out, homebuilders are pulling out all the stops to unload their inventories by year-end.

Until recently, builders were on a hot pace with housing starts throughout the region— and now they’re stuck with a large supply of unsold homes, according to Ted Wilson, principal with Dallas-based Residential Strategies.

“Builders are curtailing their starts until this inventory is worked down,” Wilson said. “Moreover, in most instances, builders are offering incentives such as mortgage rate buy-downs as well as price reductions to incentive buyers.”

Matt Lasiter, a regional director for Drees Homes told the Dallas Business Journal that builders are searching for the “magic bullet” to stoke demand.

“We’re facing a scared buyer right now,” Lasiter said. “They’re hesitant to make a move. Overnight, we saw would-be buyers run to the sidelines and bury their heads in fear of making that decision. We, as builders, are trying to find that magic bullet to draw them back out and make them comfortable enough to realize that it is still a good time to buy a house.”

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Even giants such as D.R. Horton are slashing prices and upping incentives. In its Remington Ridge community, the Houston-based builder has cut homes in the $300,000 range by 6 to 8 percent— saving buyers $20,000 to $30,000. Its lending arm DHI Mortgage is offering buyers a 4.75 percent FHA mortgage rate and up to $10,000 in closing costs. Horton even increased real estate agent commissions from 3 to 4 percent.

Others are more creative. For instance, Taylor Morrison is offering “special finance savings” of $30,000 to $65,000 on homes throughout the metroplex via interest rate buy-downs and closing cost assistance.

Through Halloween, Drees Homes is offering “Flex Cash” with the purchase of a new custom home through First Equity Mortgage, Drees’ mortgage company. Flex Cash— up to $25,000— can be used to reduce the price of the house, or it can go toward closing costs, buying down the interest rate on a loan or upgrades to a home’s design finishes.

“I think all builders are doing this,” Lasiter says. “We’re all tracking what each other is doing. We want to be aggressive with those (incentives) and be on the forefront of people’s minds, but not give away so much to where it really just hurts our bottom line.”

He told DBJ that realtors who sell Drees houses now get the standard 3 percent commission plus a bonus of 1 percent of the price of the house.

“It’s definitely a fine line to walk,” Lasiter added. “We do still have to make money at the end of the day, but we do need to sell some houses and keep our people busy.”

— Maddy Sperling

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