Over the past few years, my views on Real Estate have covered a broad swath of general and specific commentary. We’ve noted on occasion that:
– From 2003 to 2006, Real Estate was driving the economy;
– Housing wasn’t a "true" bubble; Rather, credit was a massive bubble;
– Inventory has continued to build throughout the downturn, delaying any housing bottom;
– High quality homes in good locations priced appropriately are still good sellers;
– As Mortgage Equity Withdrawal (MEW) slowed, consumer spending would also slow;
– A 35% correction in prices, from the highs, was possible.
This weekend, we learned a little something about that last concept. The WSJ reported:
"A 72-hour promotion by Hovnanian Enterprises
Inc. designed to jump-start sagging home sales exceeded the company’s
expectations, resulting in more than 2,100 gross sales, the homebuilder
The figure included more than 1,700 contracts and more
than 400 sales deposits. In its fiscal third quarter ended July 31,
Hovnanian recorded 2,539 signed contracts, excluding unconsolidated
joint ventures . . .
The "Deal of
the Century" promotion which ran from Friday through Sunday promised
"unprecedented savings" nationwide, largely on unsold homes that were
completed or under construction. The best deals available were on the
roughly 2,000 homes already started, Mr. Hovnanian told Dow Jones
Newswires last week."
Let’s put that into a bit of context: HOV did more than 2100 sales in 3 days, versus 2539 sales in the entire third quarter. That’s ~83% of the prior three months of building and selling in just 3 days.
Gee, do you think their homes were previously over-priced? Maybe just a little? Kudos to HOV for finally figuring this out.
There is a lesson in this for Real Estate Agents, home owners, and anyone else who wants/needs to sell their homes: price them realistically, and you can sell them.
It has been more than two years since prices and sales volumes peaked (August 2005), and amazingly, many people are discovering this only now . . .
Hovnanian Spurs Home Sales With Price Cuts of Up to 30%
WSJ, September 18, 2007; Page A12