A shift in Arizona home-buying tactics is helping homebuilders.
Home buyers are getting frustrated with the bidding wars and delays in foreclosures and short sales. During the past few months, a growing number of people have opted to buy new homes or existing homes sold through a regular sale. This is good news for new Home Builders.
“We are competing with the resale market in the Valley,” said Steve Hilton, chairman of Scottsdale-based Meritage Homes. “People will pay a small premium for a new home now in prime locations.”
The median price of a metro Phoenix new home sold during April was $199,362, up from $188,000 a year earlier, according to the “Phoenix Housing Market Letter.”
Many builders ramped up home construction in anticipation of the federal homebuyer tax credit. The deadline for the credit was April 30. Buyers have until June 30 to close on home purchases signed by the deadline. That means sales spurred by the federal tax credit could boost new-home sales until July.
Josh McNeil is shopping for a new home in Gilbert or Queen Creek. He didn’t make the deadline for the federal tax credit but thinks he will find better deals on homes now.
“Prices have gone down some in a few places where I am looking,” he said. “I think the builders built homes for buyers they thought would move faster for the tax credit.”
New-home sales in metro Phoenix climbed slightly to 823 in April from 789 during the same month a year ago.
McNeil is planning to buy in the next six months and wants a new home because he has friends who have failed multiple times trying to buy foreclosures or short sales.
Cautious outlook
The increase in land purchases is one of several early signs of higher expectations for the new-home market.
Nationally, builder confidence is the highest it’s been since August 2007, according to the monthly National Association of Home Builders/Wells Fargo Housing Market Index.
Through April, new-home permits in the Phoenix area were up 90 percent from last year.
But to keep that increase in perspective, 2009 was the slowest year for home building since the early 1970s. For the first four months of this year, 2,964 new-home permits have been issued in metro Phoenix, compared with 1,561 for the same period in 2009. May figures aren’t yet available.
“I think Phoenix’s housing market will gradually get better. But I am not looking for it to get dramatically better anytime soon,” Hilton said. “Some builders are overpaying for land now because they are too optimistic.”
Land prices have climbed faster in metro Phoenix than in almost any other part of the country, according to a report from the national housing-research firm Zelman & Associates. California’s Inland Empire area has also seen big jumps in land prices
The forecast for metro Phoenix home building during the next few years is for small annual increases until at least 2012.
Housing analyst Brown expects 8,500 new homes to be built in metro Phoenix this year, up from 8,000 in 2009. But his forecast calls for 22,000 new permits in 2012.
Market watchers are waiting to see if new-home sales continue to climb later this summer, after the final deadline for the federal homebuyer tax credit. No one is expecting big monthly increases in metro Phoenix home building this year, but small gains could lay a foundation for the industry’s recovery
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