This post is for all you residentail home builders out there. As I know you already have seen, the mortgage industry has tightened up a lot in the past month or so. 

Not a long time ago, a buyer of one of your new homes could go to the bank and get a 100% or 95% loan even with bad credit with little fuss or problem.  This was excellent for builders because it meant a much larger pool of potential buyers  —>  higher sales prices —> shorter time on the market —> and bigger profit for the builders.  It worked for everyone!!

That is… everyone but the secondary lending market. 

Now new home builders have to alter their game plans so they can outpace the hoards of competition.  How will builders adapt to the changing market?  Who knows… but I have already seen many builders begin change… and here’s what I’ve seen.

• Larger buyer incentives such as interest rate buydowns, upgrades, even free cars (environmentall friendly cars “given away” by rennaissance homes, an upper end home builder in Oregon)
• Drastic price drops
• Focusing on a still profitable market
• Carving out a niche in the market. (i.e. “green” homes, luxury, etc.)

So, all you builders out there… what are you going to do to stay alive?  If you aren’t separating yourself from all of the other competition you may have a difficult 2007. 

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