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Homebuilders Offer Goodies as Sales Slow

Price increases and new FHA loan rules discourage buyers
Homebuilders Offer Goodies as Sales Slow
Photograph by Michael Friberg for Bloomberg Businessweek

Joseph Beben wasn’t in the market for a new house until he heard about a year-old community in suburban Phoenix called the Bridges at Gilbert, where 10 homebuilders are offering buyers incentives such as swimming pools, built-in barbecues, and subsidized mortgages. Beben, a general manager at Best Buy, visited three sales offices before settling on a house built by Woodside Homes, which agreed to cover as much as $10,000 of his closing costs, plus another goody he wanted. “When I saw this deal, it looked like a good business decision,” says Beben, who will pay $332,000 for a 3,000-square-foot house scheduled to be completed by February. “And I wanted a pool.”

Builders in volatile housing markets such as Phoenix, Sacramento, Las Vegas, and Orlando are sweetening offers as sales slow. Large price increases in 2013, driven by investors purchasing homes to rent out, discouraged buyers. And the market is feeling the impact of cuts in the size of mortgages made by the Federal Housing Administration. “Phoenix is very slow; Sacramento is spotty,” says John Burns, a housing consultant based in Irvine, Calif. “The investors came in and pushed prices a little too high. And then FHA rocked the new-home market really hard.”