The mortgage rate that consumers said would be most effective in convincing them to buy now: a 30-year loan with a fixed 3 percent interest rate. Whether by coincidence or design, one of the country's largest homebuilders for high-end buyers, Toll Brothers Inc., announced a 3.99 percent 30-year fixed rate on new houses nationwide during the convention, through Jan. 25.
A 30-year fixed-rate loan at 3 percent was ranked twice as effective an enticement than a 3 percent loan fixed for five years, with an adjustment to 5 1/4 percent, fixed for the remainder of the loan term. Not surprisingly at a time when Fannie Mae and Freddie Mac require substantial down payments for the best interest rates, the study found that a zero-down option would be highly attractive to potential buyers -- more than twice as effective as 10 percent down.
Guarantees by builders that loan applications will be accepted if buyers verify their income and have a "fair" credit score ranked high in the survey. Such a guarantee was rated six times more effective than standard application procedures, where applicants can be rejected at the underwriting, appraisal review or other stages.
Price concessions also are compelling to would-be buyers. Most effective of all: a 10 percent discount below true market value -- in other words, instant equity for the purchaser upfront.
Among other findings in the study that some builders found sobering: Their traditional approach of offering "incentive packages" of free upgrades and amenities may not be all that effective. The same may be true for heavily marketed "green" features -- energy efficiency certifications and environmentally sensitive designs. If a new house comes with a green certification but costs $2,000 more than a standard model, this doesn't motivate shoppers to buy, researchers found. Even if the house is green-certified and costs the same as a standard house, that alone won't do the trick.
Bottom line: Look for builders to offer combination packages of special financing, price concessions, lower down payments and perhaps application guarantees. They'll still push for tax credits on Capitol Hill, but financing concessions appear to have more clout with their potential customers.