Developers Offer Incentives to Agents in Orlando, Central Florida Housing Market

The looks on the faces of builders and Florida mortgage brokers may be rather glum these days, but Central Florida’s less-than-red-hot housing market may lead to smiles for home buyers.

That’s because the glut of homes has prompted area builders to offer incentives ranging from free pools to $20,000 worth of furniture. Builders also are offering rent-to-own programs and paying closing costs. The climate has even prompted some home builders to slash their prices by as much as $80,000.

Now, developers are turning to Realtor giveaways as a way to increase sales.

DeLuca Homes, for instance, says it has boosted real estate commissions as high as 8 percent and offers a free Rolex to agents who bring in a potential Florida mortgage buyer that closes on a home.

And Morrison Homes last week kicked off a series of five weekly themed parties for Realtors at its developments - complete with food, drinks, entertainment and drawings for gift cards.

A buyers’ market
The oversupply of homes - in new communities and existing neighborhoods - has created a buyer’s market. But many potential buyers have homes of their own they cannot sell.

Homes currently for sale in Orange, Osceola, Seminole and west Volusia counties total about 26,000, says Randy Martin, president of the Orlando Regional Realtors Association and a broker with Re/Max 200.

That equates to a two-year supply, which has prompted buyers to make offers on homes in existing neighborhoods and in new communities, says Martin. He tells of a recent sale where a home was listed at $460,000 and included thousands of dollars of upgrades. In order to close the sale, the Florida mortgage loan applicant wound up paying only $382,000, and the seller is paying all the closing costs.

Cutting prices
KB Home believes slashing prices is a viable option right now and is cutting its prices by 10 to 15 percent. Homes in KB’s 20 communities in Orange, Osceola, Seminole, Lake and Polk county that were selling between $200,000 to $400,000 18 months ago now sell between $185,000 to $350,000, says Kara Cane, KB spokeswoman.

With fierce competition for those few buyers, developers are watching one another and adjusting their marketing strategies. “We look on a daily basis and try to match our product with the marketplace,” says Rob Rosen, president of the Southeast division of DeLuca Homes.

Sales will rise if developers cut prices, says Jack McCabe, a Deerfield Beach-based housing analyst. McCabe believes Florida home prices likely will drop by 15 to 20 percent.

He also believes it may have reached a point where the incentives, no matter what they might be, won’t work. “You offer incentives to give you an edge over your competition, but when everyone is offering incentives, there is no incentive,” says McCabe.

Help with selling existing homes
At Engineered Homes, which is developing seven communities in Orange, Seminole and Osceola counties, the incentives are increasing traffic, but about 80 percent of those potential home buyers have a home of their own that they are trying to sell, says Steve O’Dowd, president and COO of the company.

KB Home is working to address that issue. The builder recently formed a partnership with Re/Max International on a program where the Florida real estate company agrees to buy a potential buyer’s current home, freeing him up financially to purchase a new home. The buyer and real estate company agree on a price, and Re/Max will purchase the home if it doesn’t sell within a certain amount of time, says KB’s Kane.

Turnaround ahead?
The bigger question on everyone’s mind is how quickly the Florida housing market will turn around.

Charlie Robertson, vice president of the Central Florida area for the Florida Home Builders Association, says he’s seeing an increase in traffic and believes better days will arrive by the first quarter of next year.

McCabe isn’t as optimistic: The CEO of McCabe Research & Consulting believes that won’t happen until the end of 2008 or the beginning of 2009.

“It took us five years to get to this point,” he says. “This is not going to cure itself overnight.”