Psst, Buddy! Wanna Buy a New House, Cheap?

Rather than retain debt notes for unsold homes, developers across the country have started offering dramatic discounts on properties to entice buyers -– especially on high-end properties.

Developers in California, for instance, are offering 35 percent discounts on homes they had hoped to sell for a $1 million dollars or more.

"Scores of entrepreneurs are being affected by the credit crunch, especially real estate developers, which have large capital requirements and are struggling with high inventory levels amid the housing downturn,” says Will Shanley, a spokesman for Madison Capital Company, an alternative lender in New York.

Developer KB Homes posted a massive loss of $773 million during its most recent quarter, and its shares have dropped by 50 percent during the last 12 months.

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California’s largest home builder, Lennar, reported a $1.3 billion quarterly loss in January, and its stock has plunged 63 percent during the last year.

For them, getting 65 cents on the dollar beats getting zero. So they have begun to cast a broader net with their marketing efforts, and not just looking locally, or to their typical customers, for sales.

Some are targeting younger buyers, who might not otherwise buy a home.

"With larger government-backed loans, rise of foreclosures, and expected interest rates, homes are, increasingly affordable, especially for those priced out of the housing boom” says Michael Sivage, president of Sivage Community Development in Buffalo.

"Housing opportunities don’t just revolve around the Baby Boomers.”

Developers targeting so-called younger buyers have a large pool of potential customers -- 74 million. Psychographic factors are also at play. Younger people tend to be "optimistic, independent, driven,” says Sivage.

"For younger generations, the housing downturn equates to elevated opportunity.”

This demographic will remain a "primary focus” of housing professionals henceforth, says Sivage.

Another trend is overseas marketing.

Cachet Homes in Arizona has targeted Canadian retirees as prospective customers to take advantage of the weak dollar relative to the Canadian dollar, called the "loonie.”

"With the strong Canadian loonie, they could market their homes to that market,” says Alison Bailin, a spokeswoman for Cachet Homes. One recent promotion by the firm led to the quick sale of 12 Arizona homes to Canadians, who can leave their home country for up to six months and retain healthcare benefits back home.

Other developers are working with banks, like Chase, to provide bridge loans, at 4.75 percent, to homeowners who want to buy into new communities but still haven’t sold their old home yet.

Among those are Epcon Communities, near Detroit, says spokesman Tom Nixon. They are also making the low rate available to the buyers, he says.

"The new loan program, in conjunction with mortgage partner Chase, may have Epcon’s sales numbers quickly climbing back into record-breaking territory,” says Nixon.

Such optimism is still thinly spread. U.S. home prices have much further to fall, the chief executive of government lending agency Freddie Mac said this week.

Speaking to analysts on a conference call, Freddie Mac CEO Richard Syron said that housing prices have dropped only a third as far as he thinks they're going to. Freddie Mac expects a peak-to-trough decline of 15 percent.

The purchase-only price index of the Office of Federal Housing Enterprise Oversight, or OFHEO, shows prices are down just 2.5% from the peak.

According to the widely cited Case-Shiller national index, however, prices are down 10.2% from the peak of the market – so far.

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