Odd times in US homebuilding

Dealbreaker analyzing NYT article

Continued weakness in the housing market prompted
homebuilders to dramatically slash prices so as to reduce their inventory. In
addition, they had to experiment with incentive programs as well, when lower
prices weren't enough. In fact, builders aren't crazy about lowering prices,
because it makes homeowners think they'll go lower, so incentives like "free
upgrades" (!?) are becoming more common. It's beginning to sound like the US
auto industry. Soon they'll be offering cash back, interest-free mortgages, and
employee pricing. And once they go down that road, they won't be able to get out
of it; even when things are strong, homebuyers will demand some modest cash back
for their troubles.

Great points from Dealbreaker's Joe Weisenthal about the risks homebuilders run when they try to "incent" home buyers with factors aside from location, construction quality and completing the project on schedule.

So, when the housing market is going soft, and every builder on the street of dreams is offering upgraded appliances and fixtures free of charge, what does a builder do who wants his marketing to stand out?

Some are turning to Celebrity Endorsements: Yahoo! News

You don't need to pay the nearly $9 million asking price for
Martha Stewart's "Turkey Hill" property in Westport, Conn., to live like the
lifestyle doyenne.
Instead, simply head to Cary, N.C. There you'll find a
community built by KB Home called Twin Lakes. Each of the 1,500- to
4,100-square-foot residences features exteriors, flooring, fixtures and cabinets
chosen by Stewart; the model homes are decorated with Martha Stewart Living
products. (The first phase has sold out, and there will be 650 in all, ranging
from the low 200,000s to the mid-400,000s.) There is already a burgeoning
Stewart-affiliated community in Fairburn, Ga., and two more are set to open
early next year, in Katy, Texas, and Perris, Calif.

Wait, isn't this the same Martha Stewart whose "Martha Stewart Living" line of home products were discontinued in Kmart in the US and Zellers up here because they didn't sell?

No, wait, it gets even more surreal:

Stewart's not alone in the celebrity real estate game.
In fact, several less-commercial stars--including tennis great Andre Agassi,
basketballer Shaquille O'Neal and hotel heiress Nicky Hilton--have become
involved in real estate developments in the past year, underscoring a trend that
continues even in the softening housing market: celebrity-branded real
estate.
What's in it for the star? In Stewart's case, a
licensing fee. Others receive entrée into the real estate market, a design
payment or, as investors, equity in the property. The home buyer gets to
associate his or her lifestyle with the celebrity's image. And for the
developer, there's ever-alluring buzz.

Okay, fine. But is it paying off? Not always:

But having a celebrity name attached to a project does not
guarantee success. In the last year, two high-profile Las Vegas
developments--Las Ramblas, a casino and hotel backed very publicly by George
Clooney and Brad Pitt, and Ivana Las Vegas, a luxury skyscraper affiliated with
Ivana Trump--failed when construction costs became too high. And last month,
developers of Manhattan's 485 Fifth Ave., which featured apartments with
interiors conceived by fashion designer Peter Som, reacted to sluggish sales by
returning deposits to buyers while they lull over converting the building into a
hotel.
"Attaching a name to a property is definitely not enough at the high
end of the market," says Kelly Mack, president of Corcoran Sunshine Marketing
Group, a Manhattan-based firm that markets luxury residential properties.
"Buyers are very sophisticated, and they have sophisticated taste. And although
it might be nice to have panache attached, you have to have service."

If you're looking for signs that the US housing market has jumped the shark, celebrity endorsements has to be an awfully ominous portent.

Bright marketing idea, or last-ditch grasp to keep the party rolling? What do you think?

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