I read with interest this article citing just how badly homebuilders are looking to unload inventory. I had posted previously on the Toll Brothers 3.99% interest rate (with some concerns), but this more recent article reinforces that several different homebuilders are looking to entice home sales by utilizing the following methods, but take note of some of the fine print:

• "Buy Down" your interest rate to get to below 4% by paying points
  
• However, some of these buydowns are temporary only
• 29 percent of builders offered a buy-down in February 2009 vs. only 16% last year
• Hovnanian, Toll Brothers and Lennar are the major builders engaging in this type of incentive apparently.
• Buydowns may not be offered in all regions and are probably more prevalent in the hardest hit areas.
• The Buydown may offset other freebies that you may have negotiated otherwise, like free finished basements, free kitchen upgrades, etc.

So, the bottom line is that there is POTENTIAL for some serious long-term deals from builders out there that are desperate to move inventory and want to maintain the facade of a high selling price. In order to do so, these buydowns accomplish both getting a buyer into the house and posting a high (relatively) sale price. Just make sure you understand what you could have negotiated otherwise, what the Mortgage NPV is if the buydown is only in effect for a few years and perhaps try playing multiple builders off each other if you're in the market and have the flexibility to do so. There may not be another opportunity like this until...well, next year if the housing market declines even further...but I don't think the government's going to let that happen. They're throwing everything they've got at stabilization.

Don't forget, you can now hedge your home price with home price ETFs (if you feel they adequately represent your holdings).


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