Foreclosures Undercut Builders

By Kevin Spak, Newser Staff

Posted Mar 11, 2009 11:00 AM CDT

(Newser) – Foreclosures and other vacant homes make this a tough time to be a builder, the Wall Street Journal reports. Consider Pulte Homes, which is selling a new, four-bedroom home in Las Vegas for $214,990—while a short sale nearby offers a similar Pulte-built home for $149,999. “We are no longer competing with other builders,” said one KB Home exec. “We are competing with foreclosures.”

New-home sales fell to a 40-year low in January. “I don’t know how the builders are going to compete,” said one analyst. KB slashed its average home size in half, hoping small, cheap houses can compete with foreclosures. Most say they won’t move on price, instead offering perks like low-rate mortgages and up-to-date features. “It’s not all about price,” said Centex’s CEO. “It’s about value.”

[Images (4)]

[Quotes (2)]

"Buyers think they are going to get the best bargain with a foreclosed house, and they aren't even looking at new homes," one California realtor said. (AP Photo)

The below-market prices foreclosed homes fetch pose a problem for builders trying to sell new ones nearby. (AP Photo)

A recently started subdivision advertises reduced prices over the home plot map in Springfield, Ill. (AP Photo)

Builders work on a home in a new development in northeast Denver. (AP Photo)

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We are no longer competing with other builders. We are competing with foreclosures. - Steve Ruffner, president of the Southern California division of KB Home

Buyers think they are going to get the best bargain with a foreclosed house, and they aren't even looking at new homes. - Graham Holmes, owner of Reviron Realty

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