Are home-buying perks working?

Tax incentives. Free upgrades. Low mortgage rates. So what perks and incentives are working in today's marketplace -- one in which pending sales rose promisingly in February? Lennar Corp. is reporting that it now has to allocate an average of $50,500 per home, and has also rolled out a 'payment protection program' for recent homebuyers who become unemployed. Not to be outdone, the Calif. Association of Realtors has announced its own payment protection program for buyers who buy a home by the end of the 2009, use a Realtor, are under 70 and not self-employed. From a story in the San Francisco Chronicle:

CAR's offer is essentially like insurance for people who get laid off. It applies to first-time home buyers who open escrow starting today and close before Dec. 31. They must use a California Realtor in the transaction, not be self-employed and be younger than 70. If qualifying people are downsized, they may receive up to $1,500 a month for up to six months to help make mortgage payments...

"Prices have fallen in parts of this state to where they're beginning to make sense again," said Christopher Thornberg, principal of Beacon Economics in Los Angeles. "You're starting to see people move into the market. I know everybody will claim their particular incentive did the trick, but I would argue that price declines trump all."...

Some new-home builders are offering their own buy-downs of interest rates. Miami's Lennar Corp., which has developments in San Francisco and the East Bay, is offering a 30-year fixed 3.625 percent rate on select homes to buyers who meet certain credit and down payment requirements. (Similar to CAR, it also is offering to make mortgage payments for six months for laid-off buyers.) Hovnanian Enterprises recently offered a 3.99 percent rate that met "underwhelming" interest, it told the Wall Street Journal...

In quarterly results released this week, Lennar said it is giving buyers an average sales incentive of $50,500 per home, compared with $48,000 per home in the first quarter last year. The average sales price has fallen from $278,000 to $244,000...

Home sellers "continue to fight buyer psychology," said Patrick Duffy, a principal with Metro Intelligence Real Estate Advisers in Los Angeles. "No matter how low they go, people still worry that prices will continue to decline. They have to make them comfortable that the deal is so good they don't have to worry."