1) Builders are in the business of building home.
>> Homeowners are not in the business. Homes are their place to live.
2) Builders don't have emotional attachments to their homes -- because they're just products.
>> Homeowners on the other hand, it's their place er, home. In some cases, it's a place where their kids grow up. That's why they do have "emotional attachments" to their homes. MY home always look better than the other persons' home.
3) Builders don't make money renting or sitting on a empty houses or vacant land. They make money when they sell homes or move their inventory.
>> Homeowners on the other hand, don't have the urgency to sell, unless they're going through life changes, i.e. divorce, downsize, move up, transfer/ relo, baby/ies on the way, etc.
4) Builders adjusted their prices aggressively to market changes. Most of the big builders are public companies, and responsible to their shareholders. Shareholders have concern about the market and wanted to know what step of actions builders do to have the company back on track. That's why you see builders aggressively offer incentives. Most builders stocks were hit hard because of market changes or now in the case of subprime loans saga.
Time to buy builders stocks?
>> Homeowners not responsible to anyone, except their lenders make sure that they're not behind on mortgages-- if they're still paying their loans.
5) Reputation is key for builders. There are crappy builders out there. For the most part, they're fine. Their focus is building long-term relationships with their clients. Once they tarred the reputation... it's damaging to the business.
>> Homeowners don't have that baggage. They can sell and move on...
6) Builders take huge write-offs on losses. And builders have the pow-wah to negotiate with their vendors. They're in wholesale business.
>> For the most part homeowners fortunately.. don't have to deal with huge losses. With the exception, those owners who bought property at the peak of the market and have to sell. Then they would have come to the table (at settlement that is) with cash. Every remodeling they do to the house even though, it helps reduce their cost basis when they sell it -- still can't compete with builders ability to negotiate with their vendors.
>> TIP: In this market -- when it comes to negotiating prices, you probably have more leeway with builders.