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Costs of living

Even during the recession, midstate homebuilders aren’t
drastically dropping house prices.

Even during the recession, midstate homebuilders aren’t
drastically dropping house prices.

Instead, the builders are offering incentives that don’t
affect the end price, because protecting prices protects their margins and
property values, they said.

Customers sometimes get upset when builders sell houses at
one price when times are good only to sell similar houses at a lower price when
the market is bad, builders said. Customers can’t get back the amounts they put
into their homes if they sell their properties as builders are slicing prices,
they said.

The median prices of houses barely dropped in some parts of
the region last year, even though the number of houses sold skidded by about 22
percent. That’s partially because builders of new homes held the line on
prices. But it’s also because the market sustained more damage later in the
year, and prices don’t reflect that, said Fred Briggs, president of the Greater
Harrisburg Association of Realtors
(GHAR).

But even with sales numbers dipping, Briggs said he doesn’t
think values are going to take 30 percent drops like they did in California and Florida,
where residential real estate was bloated severely. Central
Pennsylvania didn’t see as much overbuilding, which is helping
steady prices, real estate agents and builders said. Briggs said the region
might see median house values decline, but not by much.

In 2006, when the residential real estate market was
booming, the median house price in the Harrisburg
area, including, Cumberland, Dauphin and Perry
counties, was $159,900, according to the Central Penn Multi-List Inc., the
statistical arm of the Greater Harrisburg Association of Realtors based in East Pennsboro
Township. In 2008, it was
$164,717.

Material prices play a big part in house prices. Builders
invest a certain amount of money into materials, so they have to make that
back, plus another margin to keep their businesses running, they said. So when
somebody wants to build a new house, the builder is limited with what he can do
with the price, said Bernie Campanella, housing consultant for Swatara
Township-based Fine Line/Realty, the brokerage Fine Line Homes Inc. set up to
sell its houses.

Earl Hess, president of Hess Home Builders based in Manheim Township, has not cut prices on the
houses he builds either, he said.

Bigger national builders, such as Altieri Homes, which is
now bankrupt, and K Hovnanian Homes, were willing to come into the market
several years ago, build a stockpile of houses and drop prices to move
inventory, Campanella said. Altieri would knock as much as $80,000 off the
price of some houses, he said. National builders built more on speculation than
local builders did, Hess said.

Comparable appraisals determine the cost of new homes. So if
builders keep dropping prices, customers and house builders will not be able to
get what they should for houses when the market turns around, said Stephen
Black, president of Stephen Black Builders Inc. based in Elizabeth
Township, Lancaster County.
That is no way to build up customer loyalty, he said.

Builders such as Fine Line, Hess and Black have responded to
market conditions by offering upgrades, paying down interest rates and paying
down closing costs.

Hess is offering customers between $6,000 to $8,000 for
upgrades, closing costs or whatever they choose, he said.

He said he expects the incentive to gain momentum when more
customers find out about the $8,000 first-time homebuyer tax credit included in
the federal stimulus package President Barack Obama signed last month. Hess
builds townhouses and single-family houses throughout Lancaster
and Lebanon Counties. His townhouses start at
$149,900 and his single-family houses sell for up to $400,000.

Fine Line stopped building on speculation and modified its
floor plans.

The builder’s smallest single-family houses between 2,400
and 2,600 square feet used to start at $329,000 for four-bedrooms and a two-car
garage. The company now builds single-family 1,800-square-foot ranch-style
houses that sell for about $245,000.

“You have to make them look attractive enough so that you
don’t tell people you are changing the flavor and the nature of the house,”
Campanella said.

Fine Line puts high roofs on their ranch homes to give them
a bigger feel, Campanella said.

The company offers incentives, too. Fine Line will help pay
closing costs or offer upgrades.

The company hasn’t cut back on the amount of neighborhoods
it is building. But houses don’t go up anymore before contracts are signed,
Campanella said. Fine Line is developing eight single-family communities and
five townhouse neighborhoods.

Black doesn’t build houses for first-time homebuyers. He
builds single-family houses priced between $300,000 and $800,000 in Cumberland, Dauphin, Lancaster,
Lebanon and York counties. But he said he is helping
customers build houses for their needs. If a customer wants granite
countertops, he might suggest Corian. Once he figures out what they want, he
can help customers save money by using different materials, he said.

The builder works closely with several mortgage companies
and will help customers pay down interest rates. Black also will work with
prices on model houses, but not new construction, he said. Local builders
cannot absorb as much as national builders, he said.

“We cannot give $20,000, $30,000 and $50,000 away. If you
are a major national builder you might be able to absorb the cost here and
there,” Black said. “You can’t keep building houses for free, do warranty work
on them for a year and stay in business too long.”

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