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Valley new home market shows signs of stabilizing
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Following a year of slumping sales, the Valley’s new home market is expected to stabilize in 2007 as builders continue to get rid of excess inventory.
Developers took out 2,275 building permits for homes in December, a 55 percent drop from the same period the year before, according to the latest Phoenix Housing Market Letter released Monday by real estate analyst RL Brown.
New home sales also sagged last month, down 26.6 percent from December 2005.
For 2006, there were 51,174 new home sales, a 10.9 percent drop from 2005. Also, builders took out 42,460 permits for homes, 33.2 percent fewer than the year prior.
“2006 activity will cause the industry to pause and rerecognize that housing in this market area has to be affordable,” Brown said.
The dramatic run-up in prices during last year’s housing frenzy was not sustainable, he said. Home sellers will need to price homes according to today’s market or withdraw their listings, Brown said. Builders must also be more realistic if they plan on staying in business, he said.
The median price of a new home in the Valley was $285,000 in December, down 5 percent from the same month the year before but up 8.5 percent from January 2006.
Some builders will continue to offer price cuts and incentives this year as they get rid of inventory, Brown said. They’ll need to make sure their prices are a reasonable trade-off for buyers who may have to deal with longer commutes, he said.
Prices should begin to stabilize to a more traditional 4 percent to 5 percent rate of appreciation, he said, adding that he expects building permits to pick up, reaching a more normal yearly figure in the low 40,000s. “I think 2007 is the year that everybody needs to be very careful and watch,” he said.
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