Builders throw their chips on the table.

Developers and lenders are moving past the odd celebrity shmooze and vacation timeshare to offer unprecedented financial incentives designed to insulate potential homebuyers against the chill of the cooling market.

From unorthodox plans to buy unsold homes, to offering cash incentives and fixed interest rates on mortgages, companies across the Northeast are throwing their chips on the table.

The most comprehensive of these packages is the K-Plan offered by New Jersey developer, Kaplan Companies. The plan includes provisions which guarantee Kaplan will buy the home of any potential client who is experiencing difficulty selling; pay the client's new mortgage for up to one full year if the client loses his or her job after purchasing; pay closing costs for homeowners who choose to refinance within three years; and pay renters fines associated with breaking a lease.

This offer--which is limited to Kaplan's first 60 sales--has already begun catching the eye of homebuyers sifting through various incentive programs out there, said Jason Kaplan, president of Kaplan Companies. 20 of the 60 homes were sold in the first two weeks of the program.

"I think there is just a general nervousness out there. All anyone talks about is the state of the real estate market, the decline in sales, the real estate bubble and all those things that worry people about the future. We wanted to offer a program that could really set people at ease and give them a little more confidence about the decision they are making to buy a home," Kaplan said.

Another New Jersey developer, Summit Estates, is offering to pay the first six mortgage payments for buyers at its Southwyck Estates in Newark, New Jersey.

"Nobody has less cash than after they close on their property," said Ken Barris, president of Jordan Barris, the brokerage in charges of sales at Southwyck Estates. "We wanted to make it easier for buyers. At the same time, the interest rates are rising and this program may give them the option to afford to buy the mortgage down."

Kara homes--one of the leading builders in North Brunswick, New Jersey--is offering rebates up to $100,000 as well as discounts at its design studio where clients can write off many of their flooring, plumbing and kitchen appliance costs.

The company began offering incentives the fourth quarter of last year and has since built them up in direct response to competitors incentive programs.

"The whole industry has adjusted and virtually all builders are giving discounts. We have to adjust both to the economy and the fact that there is a huge backlog of re-sale homes on the market," said Bill Buhrman, vice president of marketing with Kara Homes.

The New York Mortgage Company's new Homeowner Protection ARM is offering capped interest rates. It was created to take advantage of lower mortgage interest rates resulting from the cooling economy, according to Steve Mumma, the firm's chief investment officer.

The plan offers a 30-year loan at a rate that is capped at 6.99 % for the first ten years, with a floor of 4.0%. The rate which is figured according to the London Interbank Offered Rate (LIBOR) and is adjusted monthly, protects borrowers from obscene interest rate hikes while allowing them to take advantage of the current low rates. Homebuyers can choose an interest only payment plan for the first ten years, with self amortizing payments after that time period.

While the capped rate puts The New York Mortgage Company at some risk should interest rates rise significantly, the firm believes it can hedge that risk by retaining customers they might otherwise lose if they had to refinance due to interest rate fluctuations in the future.

Though everyone agrees the industry is cooling, theories for the reasons behind the cooling are as wide ranging as the industry itself.

Mumma blames the Feds, saying, "There is no question that the cooling has to do with the rising interest. 17 Fed tightenings over the last 2 1/2 years is starting to take its toll."

Kaplan also attributes the slowdown to the rising rates but he said other factors, such as extraordinary price appreciation that has risen 10 to 20% every year at the same time employment rates and paychecks have declined, have made it difficult for people to keep up. The war in Iraq and the increase in gas prices, could also be contributing to the apparent slump, he said.

"Eventually it had to happen. We had ten years of expediential growth, that has never happened before. It was inevitable that it dropped off, cooled down, eventually," Kaplan said.

Builders have expected the cooling would happen for a while, Buhrman said, explaining that it is part of a natural cycle in the industry.

"We have been riding a wave for the last number of years. Housing prices have risen to a point where they peaked to very high levels. At the same time, the people who are selling land have been raising their prices to ridiculous levels and we have had to follow suit and raise our prices. Now everything has begun to drop."

The future may not be quite as dismal as some have predicted though.

Buhrman believes prices may bottom out by the spring of next year and the many incetive programs on offer now will disappear. He does not think the bottom will be as severe as the recession of the late 1980's and said the market will recover relatively quickly.

Mumma is hedging his bets. "The question in my mind for the future in the real estate market, is will we have a 1990's type situation where you have massive selling, or will we have moderate sell-off."

Barris is optimistically predicting a speedy recovery. "I don't see a bubble bursting, rather I see a soft landing," he said. "I don't see values dropping in half. Rates are nowhere near as high as they were back then (late 80's, early 90's)."

Kaplan expects a leveling off of the market in the next 18 months or so.

"Long term, I believe real estate is still a great investment. People just won't see the same kinds of returns that they have in previous years," Kaplan said.