Home sales remain tepid in Valley

Valley builders and homeowners alike are continuing to struggle in an over-saturated real estate market, as buyers wait to see if prices will keep falling.

GRAPHIC: Pinal County home sales decline

GRAPHIC: Valley home sales and permits

Recent E.V. home sales by city

Two studies released this week show continued weakness in sales of newly built homes in the Valley and existing Pinal County homes.

Some 2,988 new Valley homes were sold in June, compared with 4,348 during the same month last year, the latest Phoenix Housing Market Letter by analyst RL Brown shows.

Large inventories of both new and existing homes are still hurting the market, Brown said. More than 50,000 existing homes are currently for sale in the Valley.

“There’s a lot of people who would buy if they could get rid of their present

house,” he said.

Stricter lending guidelines created in response to a spate of foreclosures nationwide are also an immense problem, Brown said.

“It cuts deeply into the pool of potential home buyers and especially first-time home buyers,” he said.

Building permit activity is also sagging.

In the first six months of 2007, 20,662 single-family home permits were issued, a 24 percent drop from the same period last year.

Brown recently adjusted his five-year forecast downward, anticipating that new home building permits will not reach pre-boom levels of about 44,000 annually until 2011.

Despite the slump in sales, builders began ramping up production on speculative homes earlier this year, likely anticipating buyers returning to the market, said Ben Sage with research firm Metrostudy.

That hasn’t happened. “It means they’re going to continue to have inventory they need to get rid of,” he said. “It’ll keep downward pressure on prices.”

Still, roughly a dozen new builders have jumped into the market in the past year, said Sage, who heads up the Houston-based company’s Arizona division.

“That’s the good news for Phoenix,” he said. “They believe in this market in the long-term.” The existing home market has also shown signs of continued weakness in recent months, especially in Pinal County, where home sellers are competing against builders.

Some 970 existing Pinal County homes were sold in the second quarter 2007, according to a study by Arizona State University’s Realty Studies department. That’s up slightly from the 840 sold in the first three months of the year but still considerably lower than the 1,785 sales recorded during the same period last year.

Sellers are competing with investors and builders, who are trying to off load homes, said real estate agent Jason Hall with RE/MAX Achievers in Chandler. Builders are getting cancellations, which adds to the housing inventory, Hall said. They can afford to cut prices by tens of thousands of dollars, while homeowners can’t, he said.

“They’re the ones with the deep pockets,” he said. For now, sellers need to keep lowering their prices, and if they can’t, they shouldn’t sell, Hall said. “Pay the bill and keep making the drive,” he said.