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As the housing market slows, builders are offering buyer discounts

Andrew Khouri, Los Angeles Times on

Published in Home and Consumer News

LOS ANGELES -- As the housing market has downshifted, more builders are offering sweeteners to close the deal.

Companies large and small are paying closing costs, buying down mortgage rates and trimming square footage to offer a cheaper abode. Some are countering the high cost of a mortgage with a more direct method -- outright lowering prices on newly built homes.

"We are really working a little bit harder ... to get people in the door and to get people excited," said Mark Mullin, a real estate agent selling several new projects in the Los Angeles area.

At the Gallery, a project in the Valley Village neighborhood of Los Angeles, a builder even offered to pay the lease on a Mini Cooper car if potential buyers agreed to go into escrow on a home.

"These are things they were not having to do a year ago," said Mullin, who's not working with the Valley Village builder.

Nationwide surveys indicate concessions are still minor compared to last decade's downturn, and a recent pullback in mortgage rates could put some heat back into the market. But there has been a decided shift in favor of the buyer.

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A John Burns Real Estate Consulting survey found that in December, 23 percent of builders lowered net prices, which would include list price reductions, as well as incentives such as money toward an upgraded wood floor that consumers previously would've had to buy. A year earlier, only 4 percent dropped prices.

In November, 27 percent of builders were cutting prices. That's still lower than just after the financial crisis; in 2010, concessions were as high as 43 percent.

The housing market slowdown has been particularly pronounced in high-cost markets like California, where the state's Realtor association says only 27 percent of households can reasonably afford the median priced single-family house. Sales of all homes dropped 12.5 percent in the three months ended November, from the same time a year earlier. Prices, which had been rising steadily, slowed considerably.

Sales of newly built homes in Southern California dropped just 2.5 percent in the three months ended in November, according to CoreLogic. But new-home data can mask a weak market because a buyer often signs a contract before the home is built, delaying the time the sale shows up in records tracked by CoreLogic.

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