Builders Try to Construct Buyer Confidence with Price Protection, Auctions
The housing slump has spooked consumers. Wachovia Corp. forecasts that nationwide home values could fall as much as 20% this year, Dawn Wotapka points out in today’s Journal. With home sales plunging, how can skittish buyers assure themselves that they’re getting a good deal?
Wotapka reports that some home builders are offering reassurance in the form of ‘price protection.’ KB Home is preparing to roll out such a program in 35 markets this month. And Ryland Group now offers price protection to any buyer who asks. Under these guarantees if the cost of a comparable home drops before closing, you get the lower price. However, as Ms. Wotapka points out, longer-term price declines could still leave buyers owing more than the house is worth.
Meanwhile, in a different story in today’s WSJ, Jilian Mincer reports on another way builders are trying to lure buyers: real-estate auctions. While still only a small percentage of housing sales, the real-estate auction market climbed 5.3% in 2007, generating $58.4 billion, according to a report from the National Auctioneers Association, which is cited in the article.
Buyers have been “paralyzed” says one one home builder quoted in the article. “They don’t know what’s a good deal and what’s not.” An auctioneer quoted in the piece says that auctions give buyers confidence that they are paying a fair price.
Readers: Are you considering purchasing a new home? Considering the uncertainty of the housing market, would buying via auction or with a “price protection” offer make you feel more comfortable about making a purchase? – Emily Friedlander