Builders eager to sell new homes

Sales pick up while analysts expect further price drops nationwide

WASHINGTON -- After offering incentives such as fancy kitchen upgrades and free swimming pools to move a glut of unsold houses, builders finally decided they needed to get serious about cutting prices.

The result was the biggest decline in median new house prices in 35 years.

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This decline in median new house price comes to no surprise to me. Even if builders have deep pockets they can't sit on their inventory like a regular home seller can. In a slow real estate market they have to adjust prices to match demand. If the demand is high they will raise prices as seen in the 2004 and 2005 market. If the demand is low they will drop prices to move homes. Many of the sellers of existing homes are in a situation where they really don't have to sell. They have the attitude, "If it sells - great. If not - I will just stay put." Home builders can't really do that. They eventually need to sell their inventory.