Tuesday, July 3, 2007

Builders: focusing on affordability

As the housing slump keeps getting more severe, builders are looking for new ways to attract clients. Price discounts and free upgrades didn’t do much to reduce inventories, so now builders are concentrating on more affordable, smaller housing units.

During the housing boom, the average size of a home increased – along with its price – as many buyers attempted to purchase as much house as possible. In recent years many have come to realize that the house they live in doesn’t have to be a huge and expensive one to provide comfort and a sense of homeliness. While demand for housing grew, builders would construct larger houses and sell them at higher prices, but now that affordability has really become an issue, 1,000 – 1,600 sq. feet homes are back in fashion.

KB Home, one of the largest home builders which suffered a second-quarter loss of $148.7 million, is trying to revive the market by offering a line of smaller homes. D.R. Horton is also downsizing, providing more affordable options for buyers. Builders are generally better motivated to unload homes than other sellers on the market, because unsold homes incur significant losses as they stay unoccupied.

Well, apparently it takes a housing slump as severe as the current one to make buyers, builders, agents, lenders and investors apply some common sense when making financial decisions. Better late than never, after all.

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