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Car Dealer Tactics on the New-Home Lot

Won-Ki Choi holds his son Jungwoo, 2, as his wife Janice wipes tears of joy from her eyes after hearing that their $429,999 bid won in a silent auction for a Fairfax County home normally priced at $536,449.
Won-Ki Choi holds his son Jungwoo, 2, as his wife Janice wipes tears of joy from her eyes after hearing that their $429,999 bid won in a silent auction for a Fairfax County home normally priced at $536,449. (By Susan Biddle -- The Washington Post)

"They are using probably whatever techniques and methods to try to sell those houses any way they can," John McClain, senior fellow at the Center for Regional Analysis at George Mason University, said of the builders.

Many of the nation's top builders, including Los Angeles-based KB Home and New Jersey-based K. Hovnanian Homes, reported losses in the third quarter.

Builders are "slitting each other's throats trying to get market capture and compete with resales," said Kenneth Wenhold, regional director of real estate research firm Metrostudy.

As a result, he said, a handful of builders have cut prices considerably, up to 20 percent.

"It's the excess inventory that is killing these builders," Wenhold said, while noting that D.C. area builders are faring better than those in markets such as Las Vegas and Florida that had even more rapid price appreciation. "For every month that it's unsold, they basically have to write checks to the banks."

Builders say they have no other choice.

"We were trying to figure out how do we break through all the clutter that's out there with home builders" said Mike Disler, Ryland's Washington Division president. "I think people understand that it's totally beyond our control and all the builders are reacting to market conditions."

In fact, 52 percent of builders surveyed in August reported lowering sales prices, unheard of a few years ago, said Gopal Ahluwalia, staff vice president of research for the National Association of Home Builders.

About one-third are offering huge reductions for a limited time, he said. More than 70 percent are offering some kind of concession compared with 50 percent four years ago, he said.

On Oct. 28, Parkside Alexandria, in partnership with Accelerated Marketing Partners of Boston, will offer 30 condominium units at Parkside at Alexandria during a live auction. Most of the other 348 units were sold the traditional way. "Basically, conventional strategies aren't working," said Jon Gollinger, chief executive of Accelerated Marketing Partners, a real estate marketing firm.

Two-bedroom condos that recently sold for $340,000 will go for a minimum of $225,000. Asked how those people who paid market price for their units would feel about the auction, Gollinger said they're better off having a sold-out building.

"If it's lower than what other people have paid, so be it," he said. "That's a decision we've made for better or for worse."


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