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EScroogeJr (< 20)

California homes at 50% discount. Not.



February 12, 2008 – Comments (1)

alstry is reporing this good news for prospective buyers: D.R. Horton will be liquidating homes at 50% OFF in the next few weeks in CA. Well, I hate to spoil the party, but sales pitches can't be considered a substitute for a real discount. Let's follow the link:

The first immediate observation: DH Horton promises discounts of "up to 50%". Now, I'm not a marketing expert, however, using the language that implies the absent link between "up to 50%" and "50%" is one marketing trick that even I can understand. Let's say, DH Horton hired me to run the advertising campain. So now I have 400 desert properties on my hands, each property carrying a price tag that makes it a complete rip-off. So how do I put the lipstick on these 400 pigs? Suppose I say these prices represent a 50% discount, wouldn't this bring traffic to the site? No, I cannot do that because stored somewhere in Google's cache memory are the actual prices we were asking for the properties in 2007, and if one of the prospective buyers turns out to be a lawyer, we'll be facing a class action lawsuit. I need some better idea. What if I say that we're giving discounts up to 50%? Wait a minute, that may actually work. They cannot possibly take us to court as long as we can point to one house that's actually selling at that discount. But if I offer that discount on one 200K home and the buyer grabs it, we're going to lose a whole 100K, which is kind of too much for SG&A expences. Wait, here's a better plan. The construction crew is just finishing that one house in Victorville. Why don't we offer it for 400K, put the ad to that effect in "Victorville's Voice", and then a week later we can offer it a 50% discount with a clear conscience? Now, that settles it. The promotion campaign advertising "50% off" will cost us nothing save the cost of that ad in "Victorville's Voice" that will make our claims true and the whole thing perfectly legal. We can then offer a 1% discount on the remaining properties and count on enough suckers to fall for it...who wants to own a piece of California?...never mind it's a desert which even lizards think is too hot for them.

So, what can we deduce from this "up to 50% off"? Answer: absolutely nothing. This is a meaningless piece of information.

I have looked briefly at the communities. As a rule, single family homes start from 200K, except for one community where they start from 175K (it's in a town with the suggestive name Desert Hot Springs). Then again, "start from" is a sales pitch that is almost as meaningless as "up to". The only difference is that you know there must be at least one house per community whose price is firmly set. Let's not bring up the issue of what the worst house in the community looks like (is it a small trailer? A medium-sized trailer? A big trailer? Anybody? Anybody? Bueler?)

Of course, I'm not suggesting that when you arrive to the site, you'll be told that the 175K home is gone, but they have a 225K home that is almost the same. After all, these guys are too honest to ever contemplate using bait-and-switch selling tactics, are they not? 

Speaking realistically, if you take advantage of this unheard-of sale, you should expect to pay a minimum amount of 200K in Desert Hot Springs, 240K in Indio, 250K in Bakersfield, and  275K in Chino. Maybe you'll even be lucky enough to find a sprinkle of townhomes under 200K in Imperial County (gosh, was there any a more wretched hole of a place?).

But wait a minute. Shall we say that these desert properties are now selling at half the price? I'm afraid  we cannot say that without exaggerating the size of the 2004-2006 real estate bubble in California. I mean, before DH Horton gave us this unheard-of opportunity, houses in Bakersfield sold for half a million? Or attached condominiums in Palm Desert cost 400K? Or houses in Temecula sold for 600-700K? That's an affront to common sense. No, there never was a time where houses in Bakersfield cost just 20-25% less than comparable houses in Orange County.

My advise to you: if you want a cheap price, don't consider any "sales of the century", "sales of the millenium", "unheard-of sales", "prices up to 100% off" and so on and so forth. Visit on a regular day when the company is not announcing any sales, and look for discounts. Because when a discount is being offered, the company knows that people will find out about it without any "up to x% off" advertising campaigns.


1 Comments – Post Your Own

#1) On February 12, 2008 at 9:25 PM, DemonDoug (30.72) wrote:

Escrooge, I think I finally agree with you on something,  I especially liked your comment in alstry's blog post:

"Buying something in Victorville and imagining that you're living in California is similar to buying a car with a dead engine and imagining that you're driving."

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