Interesting Article in today's Arizona Republic
I thought that this was a very interesting article in today's news paper.
New home market expected to continue breaking records.
Glen Creno
The Arizona Republic
Jan. 23, 2006 05:53 PM
The Arizona Republic
Jan. 23, 2006 05:53 PM
Metropolitan Phoenix's new-home market charged to another record last year and a top analyst says it could maintain a similar pace for the next five years.
Rising prices, government bottlenecks and construction delays didn't stop the market from racking up 63,570 permits for new homes, about 4.4 percent more than the 2004 record, analyst RL Brown said. He expects the market to slow to about 60,000 permits this year, but that isn't much of a falloff in what typically is one of the country's top homebuilding cities. And Brown said he wouldn't be surprised to see permits hit the 65,000 milestone in the next five years as population expands.
"This town will continue to grow and grow rapidly," he said.
Brown made his remarks at a market forecast Monday that drew more than 1,000 builders, developers, land brokers, bankers and government officials to a north Phoenix resort.
Housing forecasts are drawing particular attention these days as the Phoenix market cools and the players look for consensus on what happens next. Predictions at another recent housing forum said that from 35,000 to 45,000 homes would be built in the Valley this year, a much steeper decline than the one Brown foresees and one that could damage a local economy that relies on housing as its top industry.
Brown, publisher of the Phoenix Housing Market Letter, doesn't think the market will fall that far. He based his prediction on an expectation of continued growth in jobs and population and house prices that appear affordable compared to other Western cities.
Price increases are a constant concern in a city that has been known for affordable housing. Brown said the median price for a new home in the Valley rose $98,000 to $299,000 in 2005, increases he said would not be sustainable. He predicted that new-home prices would increase by a much-milder 4 percent this year. Analyst Steve Bottfeld, who shared the podium with Brown, said prices will rise 5 to 8 percent this year.
Builders have been hit with higher costs across the board as the subcontractors who put together the homes pay more for basic materials. Land prices also have soared.
Brown said, an acre of land that cost $7,000 to $8,000 rose at the beginning of last year sold for $80,000 at the end of the year. Still, he said, builders' margins were running 20 to 25 percent in the Valley, a record for the area.
Brown cast some skepticism on the city's growing condominium craze. He said some apartment buildings that are being converted to condos have little chance of selling well and predicted that 15 to 20 percent of the announced "vertical" or high-rise condo projects will be built.
"Condos will not become the dominant lifestyle choice for consumer in this marketplace," Brown said.
He expects that the shakeout of speculators in the resale market will continue, another trend that will stabilize prices. Among Brown's big worries, or "dealbusters" that could derail the market: terrorism, further erosion in affordability, interest rates above 8.5 percent, a mass exodus or "dump and run" by housing investors, and growing transportation snags.
Rising prices, government bottlenecks and construction delays didn't stop the market from racking up 63,570 permits for new homes, about 4.4 percent more than the 2004 record, analyst RL Brown said. He expects the market to slow to about 60,000 permits this year, but that isn't much of a falloff in what typically is one of the country's top homebuilding cities. And Brown said he wouldn't be surprised to see permits hit the 65,000 milestone in the next five years as population expands.
"This town will continue to grow and grow rapidly," he said.
Brown made his remarks at a market forecast Monday that drew more than 1,000 builders, developers, land brokers, bankers and government officials to a north Phoenix resort.
Housing forecasts are drawing particular attention these days as the Phoenix market cools and the players look for consensus on what happens next. Predictions at another recent housing forum said that from 35,000 to 45,000 homes would be built in the Valley this year, a much steeper decline than the one Brown foresees and one that could damage a local economy that relies on housing as its top industry.
Brown, publisher of the Phoenix Housing Market Letter, doesn't think the market will fall that far. He based his prediction on an expectation of continued growth in jobs and population and house prices that appear affordable compared to other Western cities.
Price increases are a constant concern in a city that has been known for affordable housing. Brown said the median price for a new home in the Valley rose $98,000 to $299,000 in 2005, increases he said would not be sustainable. He predicted that new-home prices would increase by a much-milder 4 percent this year. Analyst Steve Bottfeld, who shared the podium with Brown, said prices will rise 5 to 8 percent this year.
Builders have been hit with higher costs across the board as the subcontractors who put together the homes pay more for basic materials. Land prices also have soared.
Brown said, an acre of land that cost $7,000 to $8,000 rose at the beginning of last year sold for $80,000 at the end of the year. Still, he said, builders' margins were running 20 to 25 percent in the Valley, a record for the area.
Brown cast some skepticism on the city's growing condominium craze. He said some apartment buildings that are being converted to condos have little chance of selling well and predicted that 15 to 20 percent of the announced "vertical" or high-rise condo projects will be built.
"Condos will not become the dominant lifestyle choice for consumer in this marketplace," Brown said.
He expects that the shakeout of speculators in the resale market will continue, another trend that will stabilize prices. Among Brown's big worries, or "dealbusters" that could derail the market: terrorism, further erosion in affordability, interest rates above 8.5 percent, a mass exodus or "dump and run" by housing investors, and growing transportation snags.