By John F. Wasik
Bloomberg

Nov. 19 (Bloomberg) -- Raffles, festive balloons, open houses, car giveaways. Will any of these incentives sell houses? Not at the moment.

You don't have to be particularly creative in a market glutted with homes for sale. The painful reality is that homes are commodities. There are more than 4 million of them sitting out there unsold and more coming on the market every day due to foreclosures. If you really need to sell a house, price is the one lever that will move a property.

Almost everywhere your competition is abundant while buyers are waiting for prices to fall even more. U.S. existing-home prices are expected to drop almost 2 percent this year nationally, according to the National Association of Realtors, and are likely to fall further in areas oversaturated with homes for sale.

``Buyers just want price,'' says Mike Morgan, a Stuart, Florida-based lawyer, real-estate broker and consultant who researches property markets for hedge funds and financial institutions. ``Buyers have become educated and they can easily cut through the fluffy incentives.''

Morgan doesn't see any national rebound until at least 2010; maybe longer if builders keep constructing homes, and if banks continue dumping foreclosed properties on the market.

Morgan's Perspective

There's no way of telling how many homes are truly on the market since the picture is so dynamic.

About 2 million properties may be foreclosed upon in the coming year alone, resulting in an estimated loss of $223 billion in U.S. home equity, particularly in California, New York, Florida and Illinois, according to the Center for Responsible Lending, a North Carolina-based non-profit group.

Living near a foreclosed home may even trim as much as $5,000 from your own home's market value, the center says. Some 44 million households will be affected, or about a third of all U.S. housing units.

Selling has become a trying proposition in this dour market. Morgan has found that traditional deal-sweeteners such as paying broker bonuses and giving cash back on closing to the buyer aren't working as well as price cuts.

``On one $429,000 home a client wanted me to sell, the seller wanted to give the broker a $30,000 bonus on top of the commission. I told him it wouldn't help. I told him to just drop the price.''

Because the market is so price-sensitive -- buyers want bargains and sellers want to get prices they saw at the market's peak -- you have to be flexible when advertising your home.

Morgan suggests you sell exclusively through Internet-based property sites and local Multiple Listing Services. He has found that newspaper ads, signs and open houses don't work as well as the Internet.

What Works

When you price your property, you need to employ a strategy that can run counter to your emotional perception of the home's value. That sometimes means listing at a price far below what you have anchored upon.

Like any commodity, a home's price will follow supply-and- demand trends. In theory, custom homes in desirable neighborhoods should hold their value. Other properties should be discounted depending on how many similar homes or condos are on the market. Every market is different, though.

``If you don't get any calls on your listing price after a week, drop your price $10,000 or about 2 percent of your original asking price,'' Morgan says.

``The market will tell you what the price of your home is. You better be priced 10 percent under your competition -- and then be prepared to think about accepting offers under that.''

I know that's a disheartening strategy. Yet if you have to sell now, you need to take an honest look at housing inventories in your area.

Check Inventories

Selling in Miami? You are up against almost 80,000 listed condos and single-family homes, according to ZipRealty, an online brokerage service.

There are almost 30,000 units in Las Vegas; 42,000 in Boston; 35,000 in Seattle and 110,000 in Los Angeles. Those inventories are through October.

Price-cutting is the order of business in most major markets. The service's price-reduction index, for example, shows that more than half the listings surveyed in Boston, Orange County and Sacramento, California, are discounted.

Even markets that were considered relatively stable are bloated with unsold homes.

``People were telling me Boston and Seattle were OK,'' said Morgan, who recently visited both cities. ``I've got news for those folks. They aren't OK.''

Trouble Ahead

Will the Federal Reserve's quarter-point rate cut on Oct. 31 revive the moribund housing market?

It may spur a few buyers, but it won't help homeowners unable to refinance out of unaffordable adjustable-rate loans and headed for foreclosure. Nor will it clear out the massive inventory of newly built and previously owned homes.

Untold numbers of sellers are holding on to their properties or selling without brokers. Many pull homes off the market to rent at a loss.

Also look for builders to keep finishing new homes because they need to move inventory.

To sell those houses, they have to offer steep discounts. They will be advertising and doing anything they can to attract buyers. It will take more than balloons and donuts, though, to land the number of buyers they need to stay in business.

(John F. Wasik, author of ``The Merchant of Power,'' is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: John F. Wasik in Chicago at jwasik@bloomberg.net .

Last Updated: November 19, 2007 00:08 EST