new home price GAINS? Hmmm...

Today's report of a YOY gain in new home prices in October seems suspect to me. It just doesn't "fit" with everything I'm seeing and hearing in the market. Let me give you just one example of what's going on here in South Florida ...

I signed up a while back to receive discount emails from a major national home builder that's active in this market. They've been running a "Move in for $1" discount, where the builder eats all except for $1 of the closing costs -- and is willing to finance your purchase at a 100% loan-to-value ratio (zero down). Just today, they added a $1,000 Visa gift card on the purchase of any home before 12/29. But it's the actual price cuts, not the incentives, that are really striking. They range from the mid-20% area on up to the high 30% area. One example: A discount of $140,000 on a home previously priced at $374,990. That's 37%.

Granted, South Florida is one of the worst-hit markets in the downturn. So the discounts and cuts are likely lower in other areas. But they're out there ... and if the new home price figures incorporated them, I think we'd see "real" declines in pricing on the order of 10% or 15% nationwide.