Surge in Phoenix area new-home sales signals market rebound
GILBERT, Ariz. -- Kori Rockwell said it was exciting to see her dream home being built from the ground up.
She, her husband and three daughters have been in love with every aspect of the four-bedroom house since they moved into a KB Home development last month, Rockwell said.
"We wanted a house that hasn't been lived in, we wanted a house that didn't have somebody else's problems associated with it," Rockwell said. "It was exactly what we wanted, and there wasn't anything in it that we didn't like."
Rockwell is just one of many Valley residents who have been snapping up newly constructed homes this year.
According to a report by Arizona State University's W.P. Carey School of Business, 1,021 new single-family homes were sold in the Phoenix area during October, an 85 percent increase from the same month last year.
For the year, 7,399 new single-family homes have been sold, up 37 percent from the same period in 2011.
"It's certainly hotter than it was," said Mike Orr, author of the ASU report and director of the W.P. Carey School's Center for Real Estate Theory and Practice. "It's not returned back to normal yet, but it's increasingly getting there."
New home sales held 12 percent of residential property market share in October, up from 7 percent in 2011, the report said.
According to the U.S. Census Bureau, 10,357 single-family building permits had been issued in Maricopa and Pinal counties this year through October. For all of 2011, the number was 7,297.
Orr said the strong growth will not lead to another real estate bubble.
"A bubble occurs when people forget that bubbles are possible," he said. "Right now everybody is very very aware that we went through a bubble, so the chances of another bubble in the next 10 years is almost zero."
Jim Belfiore, president of Belfiore Real Estate Consulting, a Phoenix-based residential property research company, said the new home segment started to recover 18 months ago and the resurgence will continue into next year.
"In the spring of 2013, you are going to see that the new housing market is better than it has been in the past six years," Belfiore said. "It is going to be an astounding spring."
David Godlewski, president of the Southern Arizona Home Builders Association, said Tucson lags Phoenix in single-family home construction but will follow the Valley's lead in coming years.
"We are starting to see some improvements," Godlewski said. "I'm optimistic that we will be able to sustain and see increases in 2013."
Connie Wilhelm, president of the Home Builders Association of Central Arizona, said low interest rates are encouraging buyers to enter the market.
"It allows people to get into a home and afford mortgage easily," Wilhelm said. "It's a great incentive."
At the same time, a dwindling supply of foreclosures has pushed prices higher and left loan-burdened traditional buyers in a worse position to compete against cash-rich investors. She said this motivates traditional buyers to enter the new home segment.
The rebound is also spurring residential property investors to buy land in the Valley. Last month, two deals were sealed in Mesa.
In mid November, a New York City-based real estate investor, GTIS Partners, bought 563 acres in southeast Mesa near Phoenix-Mesa Gateway Airport.
The investor plans to develop 400 residential lots for 3,900 single-family homes and 50 acres of commercial lots for hotels, shopping malls and offices.
"We invest across the country, but we are particularly excited about the Phoenix market," said Teddy Karatz, vice president of GTIS Partners. "It has all the makings: It's a top-tier city and it's highly affordable."
Shortly after that deal, a Scottsdale-based home builder and community developer, AV Homes, and another New York City-based residential property investor, JEN Partners, announced a co-purchase of 527 acres of land adjacent to the parcels GTIS bought.
AV Homes plans to build 1,000 homes, and JEN Partners will develop 550 sites to sell to home builders.
"We are definitely coming out of the worst home-building cycle ever, and our job growth is coming back," said Carl Mulac, vice president of AV Homes. "A lot of things are pointing to the right direction right now for recovery."
Nate Nathan, president of the land brokerage firm Nathan and Associates, said his company has done 131 transactions in the last five months in the Phoenix area, up from 80 in all of last year.
"It's an absolute frenzy to buy finished lots or platted lots, the busiest my company's ever been," Nathan said.