If you’ve been thinking about buying a new home this year and still have not made your mind up…..don’t delay much longer. Supply and demand often helps dictate the price of a new home and the incentives that builders and sellers are willing to use to attract buyers.

In an effort to reduce the oversupply of homes built for the burgeoning demand for housing in ’05 and ’06, builders in their “irrational exuberance” to stay ahead of the curve produced an inordinate number of new home starts in late ’06 and ’07. This oversupply of new homes in all price ranges put significant downward pressure for pricing. Builders, faced with an abundance of unsold homes, were forced to create new and exciting incentives to achieve sales goals.

These incentives included price reductions on standing inventory, 6 to 12 monthly mortgage payments; paid closing cost and prepaids; created 5 to 10 year second mortgages with no payments required; bought interest rates down etc., etc., etc. For many builders reducing the cost of inventory was only part of the problem. Many banks refused to allow their builders to start additional homes until inventory was more manageable. Faced with the crisis of slow to no sales and no way to generate new cash…. some builders were forced to close shop, while others found themselves approaching insolvency. The story of the PANIC of ’07 goes on and on but like the economic down turns of the early 80’s and 90’s…..these things eventually come to an end. So what does all of this mean to you? It’s a Good News…Bad News scenario. “Good News” is it will all be over sometime in the future….3 months, 6 months, a year….”The Bad News” for some is it that will probably cost you more money to buy a home in the immediate future. Some think this could be as early as the second quarter of ’10. Why you say?.....because once the existing inventory of unsold homes is under control, and it will occur, there will be little of no reason for builders to create incentives to sell more homes.

One way to see the end coming is to watch the level of new housing starts. According to the Commerce Department new home starts were at the lowest level in 16 years. Most builders have not started any new homes, since most new sales are likely from their existing inventory. The lack of new starts will eventually bring the supply in line with the demand. So what you say!!!, “builders still need to sell their homes”. While that statement is true, it does not reflect the realities of the homebuilding industry. It takes anywhere from 120 to 180 days to build a home. This void in inventory build up will allow demand to accumulate and help to balance the supply and the demands. A balanced housing economy will eventually lead to more normal market conditions, thus fewer incentives required.

So if you’re thinking of buying a home in ’09, don’t wait…..no one really knows where the bottom is…..it’s still a buyer’s market, take advantage while you’re still in the drivers’ seat. Read through this paper, there are many builder incentives that continue to be offered by area builders…..be a winner…..click on franciscushomes.com for just a few.