According to the RL Brown Real Estate report ...
"housing permits, the leading gauge of home construction was down more than 40% in July, compared with a year earlier."
Undoubtedly, this is unfortunate news for builders, who are large contributors to the Greater Phoenix economy.
However, this is some positive news for the real estate market.
- Resale homes on the market number 60,000 (give or take). Roughly, a year's supply.
- Foreclosures are rising.
- Bank owned homes (REO) and short sales are glutting the market.
Before any stabilization in housing or (dare I say) rebound in real estate will be followed by a sharp reduction in inventory.
The last thing the greater Phoenix real estate market needs is more homes.
I need to point out that there is an encouraging trend for builders. New home sales figures are slightly rising. First time homeowners and consumers are able to buy quality homes at even better pricing. This bodes well for builders who offer an important product to our economy.
They just need to sell their inventory first. Before they build new homes.
Then and only then will we see the stabilization and turnaround for which we have been waiting for 3 years.
I used to work for a large builder. They just will not stop building. This really hurt us here in AZ. I am glad to know that they builders are realizing we need to reduce supply, not add to it
as a lender who works loans for new home construction this is a good sign. We were having a difficult time getting loans done for homes that had 12 month completions as it was.
Jason, Mike - I work quite a bit representing buyers of new home construction. However, there was simply too many homes, built too fast. I hate to see builders, many of which are my friends struggle. However, this is a good sign for everybody.
I want to make sure the condos go back to rentals. Too many developors just wanted to put more product on the market.
Makes it so much easier to negotiate the terms that you want if you're gonna build.
James,
We, in our market need to see the condo/villa lifestyle start to pick up. This is the product that is giving us the largest problem.
Rental communities were turned to condo's , flooding the market with product that simply could not be digested
Great post James.
Richard, Builders are facing unique challenges. They need to reduce carrying costs of unsold homes in their current inventory before they build more.
James,
I have seen that many builders compete with the old homes in the surrounding areas, so for instance, if you have a house from 1995 and your home should be at $ 200,000 FMV, then a builder that sit around very near in the area, go down for the same price, same or more SQF and 2008, they can play with their Profit Margin, they can go down or UP, but the other hoses? NO ! that is not fair, specially on this market.
Ray SAenz
Ray - you bring up a good point. Builders can sometimes price the same or lower as the nearby competition and often sell more quickly because it is a newer home. - think new car smell -