Scrapping the incentives to find a better homebuyer

Long, long ago, in a galaxy far, far away, home buyers would spend time to (a) fix their credit; (b) create a household budget; and (c) save up a down payment, often starting years before their target date to buy a home. Of course that was before prices started rising faster than they could save up those down payments and various loans offered 100% (or more) financing, so many buyers simply bought before they would have otherwise, which is primarily why it's going to take longer to work off existing inventory.

For affordable housing builder South County Housing in the Bay Area, they're eschewing the free upgrades for something more fundamental to their business model: education. From today's San Jose Mercury News, writer McAllister explains:

Faced with the challenge of selling more than 500 homes over the next few years in a market that may remain soft for a while, affordable-housing developer South County Housing is not trying to lure buyers with free flat-screen televisions or granite countertops, the way some for-profit builders have.

Instead, the non-profit company has launched a campaign to fill its pipeline with qualified home buyers who fall in the low- to moderate-income range - which may mean helping them establish multi-year savings plans or guiding them on how to fix credit problems.

Each buyer working with South County Housing will get a pre-purchase plan tailored to their needs...The plan could include credit counseling, or setting up a budgeting and savings plan. South County Housing is establishing an "individual development account" for some buyers, in which the company would match a portion of a client's savings toward a down payment. In some cases, buyers will qualify for down payment assistance programs offered by the cities of Gilroy and Morgan Hill, or for special programs for teachers.

Buyers must be able to qualify for traditional loans, such as those offered by the California Housing Finance Agency (CalHFA), the state government's center for affordable housing funding.

CalHFA loans typically are 30-year, fixed-rate loans, not the risky adjustable-rate loans with artificially low introductory rates that were widely available from myriad lenders in recent years.