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‘Buy now!’ Conventional Wisdom Says the Time is Right…

‘Buy now!’ Conventional Wisdom Says the Time is Right…

9/15/2006

‘Buy now!’ Conventional Wisdom Says the Time is Right to Take Advantage of Home Incentives

Contrary to today’s popular wisdom to ride out the current market correction in single-family home sales, some experts say: Buy now.

Incentives, from swimming pools to cash offerings of up to $100,000, eventually will come to an end. “Most of the pricing incentives are geared to get closings by the end of the year,” said Pat Moroney, president of Standard Pacific Homes. His company is offering $25,000 to $100,000 off new home sales, depending on the house.

Standard Pacific homes, without incentives, range from the high $100,000s in Maricopa and other parts of Pinal County to the low $400,000s in Queen Creek, Gilbert and Peoria.

“It’s a better time to buy now than this same time last year,” Moroney said. “A lot of people are waiting to see the bottom of the market and, in my opinion, we’re almost there.”

The home builder said the excess inventory — mostly spec houses built when sales were booming in late 2004 and through 2005 — is being absorbed quickly.

Prices are lower now, Moroney said, because much of the excess inventory has come from cancellations, backlogging builders.

Michael Chasse, a home builder specialist with Scottsdale-based Land Advisors Organization, said builders now are in a position to offer special deals because today’s prices are based on 2004 land prices. He said there usually is a two-year period between when the land is bought and houses get built.

Two things are happening. First, the acceleration of land prices in 2005 will impact home prices next year.

“If (prices) follow the trend,” Chasse said, “I would expect ’07 prices to be higher.” Second, the higher prices for homes during the boom period, coupled with the lower land prices in 2004, provides, in essence, a kind of wiggle room for today’s home builder in which to offer incentives.

Chasse also pointed out that for the first half of 2006, the Multiple Listing Service reported new listings of 3,000 to 4,000 per month.

In July, however, only 1,300 new homes were added to the MLS, and just a little more than 500 were added in August for a total of 46,028 from January through August of this year.

“This is significant in that resale homes on the market appear to be reaching a peak,” Chasse said.

“Hopefully, this trend will continue and we’ll reach the tipping point where listings on the market will start coming down to a more reasonable level, which will also establish less sales competition for the new home builders.”

John Graham, president of Scottsdale-based Sunbelt Holdings, said in a healthy market, 15,000 or fewer homes are on the books.

Keith Mishkin, a broker with Cambridge Properties, echoed the sentiment of others, saying people can take advantage of “the temporary moment.”

“For those saying ‘Oh, I missed the market,’ here’s your chance,” Mishkin said.

Graham, warned, however, that people shouldn’t expect to get just any home with loads of incentives. Home builders are trying to get rid of excess inventories in various spots, not everywhere.

“It’s a little deceptive,” Graham said. “I always say, if you buy a house or a car — anything because it’s cheaper — you may want to think about it. You might not get your dream house now, but if you like the house, the neighborhood, the schools and you get incentives, then it’s a great time to buy.”

By Christina Gibbons, The Arizona Business Journal, September 15, 2006

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