Market For New Homes Seen Bottoming Out in Arizona

New home construction has most likely hit bottom in metropolitan Phoenix, according to the Arizona Republic.

There were 2,341 single-family permits issued in October, according to RL Brown’s Phoenix Housing Market Report. That’s up slightly from September, but half the pace seen in October 2005.

Part of the slowdown is due to the many canceled orders for new homes in the Valley. Arizona mortgage rates remain low, but prices have risen too far for many buyers. Brown cites sources saying as many as 40 percent of all contracts for new homes in 2005 and early 2006 being canceled, mostly by investors getting cold feet.

Many of those homes, up to 25,000, were still being built.

Brown is forecasting home construction building permits this year to fall 29 percent below 2005’s record pace of 63,570. As more contracts are cancelled, this year’s home-building pace is also expected to fall below the 47,720 new-home permits issued in 2004.

The good news? If the market has bottomed out, well, it can’t go any lower. We will have to wait and see if the once-torrid Arizona housing market has hit rock bottom, or if the worst is yet to come.