Community Property Type Price Min Price Max Beds Baths

Valley’s New Home Market Starting to Slow

Valley’s New Home Market Starting to Slow

3/27/2006

New home permits in February dropped more than 20 percent from the same time last year, perhaps a signal that the Valley’s incessant new home price increases will end.

The 3,729 permits issued last month marked the lowest total in the last 24 months, according to the latest issue of The Phoenix Housing Letter, released Monday.

Although resale market prices are decreasing, Letter publisher R.L. Brown said the new home market will take longer to adjust because “builders aren’t prone to lower the base prices of a product.”

However, builders have rolled out numerous incentives, including price discounts and free or discounted upgrades.

“That’s happening all over the Valley right now,” Brown said.

Builders are also adding cheaper floorplans to existing models within specific developments — in effect repositioning the product within the community.

Brown doesn’t see the current housing conditions as a precursor to any kind a disaster.

“We’re seeing the resale market begin to adjust,” said Brown. “Housing prices reached a point to where the consumer said no more.”

Housing prices have skyrocketed since the beginning of 2005, eclipsing appreciation rates of 40 and 50 percent in many parts of the Valley. But those days may be over as sellers get more realistic with pricing.

“I don’t think it will be very long before the resale (price) is reflective of what consumers are willing to pay for a home,” Brown said.

Brown doesn’t believe the Valley can sustain the 1.63 percent monthly rate increase. The March average base price of all of plans offered in the marketplace was $387,000, while the median closing price was $268,000.

“It was past time that the rapidly upward price pressures on the new housing market ended,” Brown said. “I suspect that we can say they’ve ended.”

By The Business Journal of Phoenix, March 27, 2006

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