Real Estate Investors are scooping up foreclosure houses and short sales and low priced traditional homes here in Phoenix in anticipation that Phoenix’s distressed properties may be diminishing and the tide will be turning and home prices will begin to rise again. In my research I came across an interesting point of view regarding the demand for new home construction and how in the near future the prices of new homes will begin to rise as the supply of new homes will not keep up. Of course, the opinions expressed in the article below are predicated on America returning to a decent economy, with job creation and consumer confidence getting back to normal.
However, considering the pace at which Investors are purchasing the foreclosure properties and traditionally priced properties that are at lower prices and the brightening of the Phoenix economy and ongoing demand for people to want to live in sunny environments…it’s possible we may see demand for new home construction start to emerge sooner than expected. Phoenix has a total of just 8,100 new homes that are either for sale or under construction, down from 53,000 in mid-2006.
Let me remind you that if you are considering looking at new homes that the Realtor you will meet when you enter the homebuilder’s showroom works for the SELLER (Home Builder) NOT YOU. Be sure you enter the homebuilder’s showrooms with an Accredited Buyer Representative, who will be in a position to advise you on the market conditions in the area you are looking to purchase and negotiate a better deal for you.
It’s a Great Time to Buy a House in Phoenix
Mike Castleman, the Texan with the best realtime view of housing in the U.S., tells editor-at- large Shawn Tully (Fortune.CNN.com) that the naysayers are about to get a big surprise: rising prices for new homes.
From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom’s image of the lanky Texas rancher. On a recent March evening, Castleman declares “I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Castleman, 70. “The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall.”
Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he’s spent more than three decades tracking real-time data on the country’s inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that’s under construction, one that’s finished and for sale, or a home that’s sold. Metrostudy covers 19 states, or around 65% of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and Nevada. The company’s client list includes virtually every major homebuilder and bank — from Pulte (PHM) and KB Home (KBH) to Bank of America (BAC) and Wells Fargo (WFC).
The key figures that Metrostudy collects, and that those clients prize, are the number of homes that are vacant and for sale in each city, and the number of months it takes to sell all of them. Together those figures measure inventory — the key metric in determining whether a market has a surplus or a shortage of new housing.
Today Castleman is witnessing an extraordinary reversal of the new-home glut that helped sink prices just a few years ago. In the 41 cities Metrostudy covers, a total of 78,000 houses are now either vacant and for sale, or under construction. That’s less than one-fourth of the 343,000 units in those two categories at the peak of the frenzy in mid-2006, and well below the level of a decade ago. “If we had anything like normal levels of buying, those houses would sell in 2½ months,” says Castleman. “We’d see an incredible shortage. And that’s where we’re heading.”
If all the noise you’re hearing about housing has you totally confused, join the crowd. One day you’ll read that owning a home has never been more affordable. The next day you’ll see news that housing starts have plunged to nearly their lowest level in half a century, as headlines announced in March. After four years of falling prices and surging foreclosures, it’s hard to know what to think. Even Robert Shiller and Karl Case can’t agree. The two economists, who together created the widely followed S&P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing’s future. Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: “The lack of new home building is a huge help that a lot of people are ignoring,” says Case. “People think I’m crazy to be optimistic, but housing is looking like the little engine that could.”
To see where real estate is truly headed, it’s critical to keep your eye firmly on the fundamentals that, over time, always determine the course of prices and construction. During the last decade’s historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled “Is the Housing Boom Over?,” this writer’s analysis found that the basic forces that govern the market — the cost of owning vs. renting and the level of new construction — were in bubble territory. Eventually reality set in, and prices plummeted. Our current view focuses on those same fundamentals — only now they’re pointing in the opposite direction.
So let’s state it simply and forcibly: Housing is back in Phoenix.
Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction that so amazes Castleman. The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.
Call us:1-888-844-0001 for a list of reputable home builders and advice on what areas are stable where you will see your home value appreciate over time. WE ARE ACCREDITED BUYER RESPRESENTATIVES.
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