As home sales slowed last year, builders began offering incentives. The results were lackluster. Southern California builders sold 44,234 new homes last year, down from 66,911 in 2006, according to DataQuick Information Systems.
Centex, another major builder, said it resorted to price cuts because incentives weren't working and many borrowers had trouble getting the jumbo mortgages they needed for higher-priced homes.
"We really adjusted prices down where they need to get to," Centex Chief Financial Officer Catherine R. Smith recently told Wall Street analysts in a conference call.
In addition to slashing prices, some builders are scaling down the size of their homes to make them more affordable.
In Victorville, for example, new houses built by KB Home are selling for about 33% less than they did two years ago because of the combination of price cuts and size reductions, Chief Executive Jeffrey Mezger said at a conference last week.
Builders are pursuing different strategies on price cutting, and some are still trying to hold the line.
In the Riverside County suburb of Lake Elsinore last week, a saleswoman at one housing development that had cut prices recalled getting a visit from a field representative from a rival firm that had kept prices level.
The saleswoman, who declined to give her name because she was not authorized to speak for the company, said her counterpart asked for a price list. The reason: The rival hoped to persuade her corporate headquarters to make similar trims.
If there is any grumbling about price cuts, it's from people selling their own homes.
In Lake Elsinore, for instance, more than 100 resale homes are listed in the $300,000-to-$400,000 range. For that price, buyers can get a brand-new model that has been freshly discounted.
Jack Lloyd, 51, has been trying to sell his Palmdale house for nearly a year. He's cut the asking price several times, and he's now seeking $285,000 -- down from the original $425,000.
But Lloyd isn't hopeful, noting that new houses in nearby developments are $240,000.
"Who's going to buy mine?" he asked. "Sure, you have to put in carpet, put in the lawn in those, but is that going to cost you 40 grand? I don't think so."
Lancaster real estate agent James Baker said existing-home sellers must now lower their prices if they wanted to compete.
