Hope For Phoenix Housing Market Stability Dwindles
New-home sales jumped nationally in April, surprising many market watchers.
But as Phoenix home loan activity continued to stall, the housing market went the other way in Arizona’s biggest city last month.
Few in the housing industry - those who are seeing listings increase and more Arizona home loan deals fall through due to tighter guidelines - will be surprised to hear analyst RL Brown’s April report on the market.
New-home sales, new-home permits and resales were all down in April from March in metro Phoenix.
Brown said the hope that supply and demand for homes in metro Phoenix will balance out in 2007 grows “fainter and fainter.” It’s key to the housing market picking back up.
With Arizona mortgage volume slipping, new-home sales across the Valley fell 20 percent from March. Home-building permits were down 5 percent. Existing home sales dropped 8 percent.
Brown said if the Valley’s housing market doesn’t pick up, this could be a year of 34,000 single-family permits, but he remains optimistic the market will do better than that.
Last year, there were 42,460 new homes built Valley-wide.
Nationally, sales of new single-family homes increased 16 percent in April, according to the U.S. Department of Commerce.
Much of that increase was due to builders cutting prices and offering substantial incentives amid low mortgage rates, said Brian Catalde, president of the National Association of Home Builders.
“We are also seeing buyers gravitate toward lower-priced homes to counter their affordability problems,” Catalde said.
There are new-home deals in the Valley, plenty of them. But Brown said that home builders can’t increase their sales (and prices) until buyers can sell their existing homes.
He said 2007 is a transition period for the Arizona housing market and “if you made a lot of money in 2005 and even 2006, hope you banked some of it.”
Here are some of his new realties for the Phoenix housing market:
- Builders can’t raise prices without expecting some consequences.
- The housing industry will eventually “give back” one way or another much of the profit gains of 2004-05.
- The demise of “wink-wink” home loans and mortgage refinancing will cut the ranks of home buyers.
- Appraisals will be based on today’s comparable sales, not comps from 2005-06, and appraisers “will be edgy as cats at a dog show.”
- Arizona home mortgage defaults will impact the market, more from a psychological impact than from the sheer volume of foreclosures.
- Tiny lots in far-off places will be in plentiful oversupply.
- Infill will capture a bigger market share.
Brown reiterates that the Valley will continue to grow, which means the market eventually will rebound and grow again. But, based on his April report, the rebound might not be as soon as many hoped it would be.
SOURCE: Arizona Republic