A Land Rush in Phoenix

Builders in Phoenix buy property for subdivisions

Developers and homebuilders in metropolitan Phoenix are scrambling to buy property for dozens of new subdivisions.

The Arizona Republic reports (http://bit.ly/WOlsWB) that new home building rose 71 percent in 2012 over 2011 and that the number of available lots is dwindling.

The land rush is further evidence that metro Phoenix’s homebuilding industry is recovering from its devastating six-year slump.

Homebuilders sealed nearly 100 land deals in December alone that will create thousands of sites for homes and are now buying more land in more moderately priced areas in the northwest and southwest parts of metro Phoenix as prices continue to rise in the metro area’s southeastern portion.

The number of empty lots ready for construction has shrunk to its lowest level in more than a decade, with only enough lots in hand to last builders a year.

The land purchases are mostly in communities started before the crash and in some ways echo growth in the boom years, except the developments farthest from Phoenix’s core aren’t yet attracting builder or buyer attention. Most of the land purchases are inside the outermost freeways.

Avoiding a repeat of the 60,000 houses built in the region during 2005-06 is good news. This time around, new-home construction is based on real demand from homeowners and not speculation by investors and builders. Metro Phoenix homebuilders began to see more people checking out their model homes and sales start to rise in spring 2012, six months after the resale market had begun to recover.

The number of new homes built in the Phoenix area climbed 71 percent to 11,600 in 2012. New-home sales followed the trend, with buyers closing on 10,034 new houses last year, up 41 percent from 2011. These are the biggest jumps for the new-home market since 2006. The median price of a new house climbed almost 15 percent during 2012 to reach $240,000.

“The recovery in the home market is real. It’s not about wishing and building for buyers who aren’t there or can’t afford the house,” said Arizona real-estate analyst RL Brown, co-publisher of the Phoenix Housing Market Letter.

Mike Orr, who studies real estate at Arizona State University’s W.P. Carey School of Business, believes builders must construct more houses in the Phoenix area this year to keep up with buyer demand. Another reason: The number of houses offered for resale has hovered near a record low for the past year.

“It seems many people may have decided to hang onto their homes in an effort to let values keep going up. I also anticipate another possible drop in supply this spring,” Orr said. “Unless homebuilders can start keeping up with rising demand, we may have a chronic supply problem.”

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Information from: The Arizona Republic, http://www.azcentral.com

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