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An unfinished home that was sold in the Velvendo community in Gilbert, Ariz. is shown. (KTAR Photo/Aaron Granillo)

GILBERT, Ariz. -- After being one of the hardest-hit regions during the recession, the Southwest is now leading the charge of a fast-pace recovery.

Local homebuilders are taking notice, anticipating a frenzied demand for housing.

On a recent afternoon in Gilbert, construction crews were busy building phase one of the Velvendo community, a subdivision near the 202 Santan Freeway and Lindsay Road.

"The site is 90 acres. Approximately 218 lots were entitled on this property," said Vice President of Land Acquisition for Meritage Homes Michael IlesCremieux.

The Scottsdale company bought the property last year for about $13 million, which was a pretty good deal considering how much the piece of land used to cost.

"This community was in escrow at the height of the market in 2005 to 2006 for $34 million," said IlesCremieux.

The Velvendo property reached its highest price point during a volatile time, according to Michael Orr, a housing researcher at ASU's W.P. Carey School of Business.

"2005 was actually the turning point. We hit the absolute lowest inventory at the end of March, so the bubble was in full expansion," he said.

When the bubble finally burst around the end of 2007, home prices took a dramatic hit.

"Most areas of Phoenix lost about 50 percent of their value in just one year," said Orr.

Homeowners couldn't afford their mortgage and homebuilders had no reason to build.

"During the downturn, you might have one house or zero houses being started. It looked like a ghost town, and there wasn't any activity whatsoever," said IlesCremieux.

In 2013, it's a different picture. Homebuilders like Meritage are hopeful, and once again purchasing big, empty lots.

"We believe that 40 percent of homeowners in the Phoenix-metro area are underwater still on their homes today, so that leaves us with a smaller amount of demand that's out there to buy homes," said IlesCremieux. "You have to be strategic about what plans you offer, and what locations you offer them in."

So far, Velvendo has been a success since its grand opening in 2012.

"Everybody who has purchased in the first phase has appreciation and equity in their home," said IlesCremieux. "We've raised prices here approximately $70,000 to $80,000."

Still, housing experts predict Phoenix is at least three years away from fully recovering, and that could all depend on population growth.

"We've built so few homes relative to the increase in population," said Orr. "If Arizona continues to be a popular place to move to, we could see quite a significant stress in the market, which again is going to push prices up."

Aaron Granillo, News Editor

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