Survey Shows Declines In Incentive Selling

When the percentage of incentive ads begins to climb, it's a sure sign that traffic and sales are softening, or that the end of a quarter is near. Public home builders are notorious for trying to sell, in any way, as many spec houses as possible at the end of a quarter or year.

For example, this past year, ads with incentives peaked in the first week of December, near year-end, at 52% of all those run by the surveyed public home builders, then declined to an average of about 35% until late February.

Perhaps it was war fears or bad weather that pushed incentive ads up to 39% in mid-March. But that's also closing in on the end of another quarter. The decline has been steady since then to 33% in the first week of May.

For mainstream private builders, the most interesting aspect of Zelman's survey is that it gives an early warning of trouble on the horizon to those in local markets where incentives are on the up-swing. For instance, based on the week of May 4, Zelman categorizes the markets show in the chart as "healthy," "average" or "weak."