Reporting from Washington — With the April 30 deadline looming, home buyers need to get a move on if they hope to qualify for the federal tax credits of $8,000 for first-timers or $6,500 for owners wishing to move up.
But even if you don't have a binding contract in place by the end of the month, there's a good chance that plenty of incentives will be available after the federal stimuli expire.
In the new-home sector, builders are likely to dangle free options and upgrades, help with closing costs or perhaps even cash in an effort to keep the sales momentum going into the heart of the spring and summer home-buying seasons.
The goodies may not be as great in the resale market, if only because anxious sellers have probably already cut their asking prices to the bone. But sellers might be persuaded to chip in on closing costs or pay for a home inspection. And local jurisdictions or utilities may offer tax breaks of their own.
It's doubtful that builder incentives will be as prevalent in the new-home market as they were in December 2008, at the height of the housing meltdown. But giveaways are almost always available, even when the market is smoldering.
"Incentives don't disappear, even in the best of times," says Steve Melman, director of economic services for the National Assn. of Home Builders. "Even in the good times, builders will throw things in."
Just 16 months ago, according to the NAHB, nearly 3 of 4 builders were trimming their prices in an effort to dump their huge backlogs of finished but unsold product.
At the same time, two-thirds were trying to entice worried buyers off the sidelines with offers of no-cost options such as fireplaces, tricked-out kitchens and finished basements; 59% were offering to help with closing costs; and 41% were willing to absorb the points that lenders were charging buyers.
Also, even though interest rates were practically at rock bottom, 28% of the nation's builders were offering to buy down, or subsidize, their buyers' mortgage rates.
Fast-forward to June 2009, the last time the NAHB quizzed its members about the freebies they were offering, and the deals weren't as widespread. Nevertheless, 64% were still cutting prices, 55% were offering no-cost options, 45% were paying closing costs and 28% were absorbing the lender-required points. About 17% were even offering rate buy-downs.
Now that there are few empty houses sitting on builders' shelves -- new-home inventories are at their lowest level in 40 years -- some real estate figures believe that there is no reason to offer incentives. Others contend that the recession has beaten down builders so badly that it's time they started beefing up their bottom lines.
"Inventories are incredibly low," Melman says. "Builders have stopped building."
But others think incentives might make a comeback, particularly in the hardest-hit markets where there is still a heavy load of foreclosures or an oversupply of existing homes on the market -- or both. And some say builders who have benefited from the government's largesse may be willing to make some concessions.
A check around the country confirms that.
For example, Ryan Homes is offering an $8,000 "stimulus package" in communities in numerous states to be used for closing costs or customer selections.
In the Chicago area, Lennar Homes is offering closing-cost assistance, plus a free washer and dryer if buyers register online.
And in San Diego and Riverside -- where the state of California is offering a tax credit of as much as $10,000 in addition to the federal credit -- no closing costs is the come-on at most Brookfield Homes communities.
Of course, not all incentives are created equal. For example, home buyers would do well to avoid offers of a free vacation or automobile, which add nothing to the value of their properties.
Beware, too, of freebies in exchange for using the builder's mortgage company. Sometimes good deals are available from the in-house lender, but if the incentives aren't offered to all buyers regardless of whether they use the builder for a loan, it is a violation of federal law.
The best options are items for which the next owner would be willing to pay extra. A larger garage with an extra parking bay fits that bill, for example. So do top-of-the-line kitchen cabinets and countertops. And upgraded windows not only add net worth, they also help lower utility bills.
Fancy appliances, on the other hand, may look good, but they wear out. Even if the appliances are still running, the next owner isn't likely to want to pay for a souped-up range or refrigerator that has seen better days.
Distributed by United Feature Syndicate.