A 1,414-acre, master-planned community north of Queen Creek Road provides a microcosmic view of the local new home market's journey through the drastic economic downturn and ongoing recovery.
Located at Power and Queen Creek roads in Gilbert, Power Ranch began as an acquisition of 2,000 acres of farmland in 1995. The property was divided into two separate developments - 1,414-acre Power Ranch and 670-acre Trilogy at Power Ranch - and construction began in 1998.
Shea Homes completed Trilogy at Power Ranch - an active adult community - and it has been fully turned over to the residents. In all, about 4,000 homes have been sold in Power Ranch with another 1,200 homes to be sold by the builders.
Scottsdale-based Sunbelt Holdings is the master developer of Power Ranch. Sean Walters, chief operating officer, said activity has picked up inside the community after projects were dropped and builders struggled financially when the real estate market tanked.
"Sales within the neighborhoods are picking up, and the builders report ... that they're seeing more serious buyers these days," he said.
Currently, D.R. Horton, T.W. Lewis and Richmond American Homes are building at Power Ranch. Earlier this month, Richmond American purchased 53 lots at Power Ranch from EHJP Property Holdings for more than $2 million, according to Land Advisors Organization, which handled the sale. Richmond American wouldn't comment on the transaction.
"The Richmond American transaction was one where those lots were originally owned by another builder, and the bank that was financing those lots ended up with them," Walters said. "They resold the lots, and Richmond American has purchased them and will build them out."
Greg Burger, co-principal of RL Brown Housing Reports, a Valley real estate research firm, said Power Ranch illustrates the local new home market's boom and subsequent downfall. At its inception, Power Ranch was a dominant master plan and represented "cutting edge communities and designs," he said.
"In 2004 was the height of the activity in Power Ranch (and Trilogy at Power Ranch), with 1,052 new home construction permits," he said. "From the standpoint of (new home sales), 2004 was the height there with 1,001 closings."
Permit activity then dropped to 516 in 2005, 525 in 2006 and 95 in 2007, Burger said. New home sales fell to 737 in 2005, 513 in 2006 and 833 in 2007, he said.
Now, D.R. Horton and Richmond American are being "very aggressive" about purchasing lots in Power Ranch and building affordably priced homes to compete with foreclosures and surrounding new home communities, Burger said.
"Year to date through June, there's been 195 new home sales and 95 new home construction permits," he said. "That's 16 new home starts a month. Of those, D.R. Horton has started 26 homes, and Richmond American has started 59, and T.W. Lewis had seven permits that were issued. Richmond American is starting almost 10 houses a month out there."
The builders have been seeking permits for homes they can complete in time for buyers to take advantage of the $8,000 federal First-Time Home Buyer Tax Credit, which expires Nov. 30, Walters said.
In addition to new home sales, Power Ranch has seen an increase in existing home sales, he said.
From January through June, 211 existing homes have sold in Power Ranch, including 114 foreclosure homes and 97 owner-occupied homes, Burger said.
"We've certainly had foreclosures, but we've probably fared a little better than other communities just because we've had a lot of owners who have lived in the community longer," Walters said. "That's made a big difference with regard to home pricing and financing."
The development of Power Ranch, for the most part, has proceeded as expected, he said.
"We had some times where velocity exceeded our expectations, and we've had some times when our velocity has been lower than our expectations," Walters said. "But as we put these models together, we're looking forward 10 to 15 years, and so you make your best guess. But all and all, we have achieved our goals with the property. We would love to do another project like this because it's been a huge success for us."