FWIW, this is the Las Vegas Review Journal's take on the Pulte price cuts:
reviewjournal.com
EDITORIAL: An inevitable adjustment
Homebuilders cutting prices an example of the market at work
The region's second-largest homebuilder, Pulte Homes -- expected to build 3,500 new homes in the valley this year -- has just cut its new home prices by 5 to 25 percent.
The move reverses a trend that saw the median price of an area home double over the past decade -- a time period during which household income increased by only 22 percent.
After home prices jumped 35 percent in the past eight months alone, the adjustment was inevitable.
"I think we hit a ceiling at a certain point, and the buyer just wasn't willing to pay. It is simple economics between supply and demand," explains Sheryl Palmer, Nevada area president for Pulte.
Indeed. Not only do asking prices eventually reach a point where sellers can no longer find willing buyers, but the price cut also exemplifies another way in which the market works. In February, there were only 1,400 existing homes listed for resale in the Las Vegas market. But as the median price of a resale home reached $250,000, more and more homeowners put their properties on the market in an attempt to take advantage of the boom.
Economists would describe that as a "signal" sent by climbing prices, which had the effect of triggering an increase in supply.
There are currently 16,000 existing homes for sale in the area -- about half of them built within the past year, indicating they're being dropped on the market by speculators and investors, Ms. Palmer says.
That makes it a "buyer's market," in which a careful home-shopper can make a lower offer and sometimes wait out a seller.
Under those circumstances, the higher asking prices simply could not be sustained.
Of course, there's always someone who fails to see it that way. Denver-based real estate investor Ross King reportedly is furious about the price cuts and threatening legal action. The discount comes less than two weeks after Mr. King closed on a 1,900-square-foot home in Henderson's Anthem master-planned community -- a home where he is now "upside down," collecting only $1,600 per month in rent toward a $2,200 mortgage.
Mr. King protests he was subjected to a "hard sell" before he made his purchase. But unless he can show actual coercion or fraud -- and Ms. Palmer says Pulte's sales staff didn't learn of the price cuts until Saturday -- Mr. King is in the same position as a shopper who paid full price for a set of furniture before Christmas and is now upset to see how much he could have saved had he bought in January.
Not only is there no guarantee that the price of any commodity (including homes) will always go up, but the opposite is nearly always true -- prices will go down as well as up, with buyers and suppliers adjusting their plans according to current conditions, in cycles no one can reliably predict.
Caveat emptor.
All I gotta say to the clown who bought on spec and now wants to sue Pulte, "Boo-focking-hoo"....<NG> |
