After many years of dismal headlines and harsh news, the real estate market is gaining even more ground, now being dubbed a key economic driver as other sectors are seeing more significant slowing. According to the Wall Street Journal, an improving housing market is giving the nation’s economy it’s largest boost since the market boom– and Maracay Homes is happily seeing the affects.
This increase in demand, in combination with rising rents and increased household formations, pushing our home inventories to their lowest levels in years. In the Valley
, Maracay Homes sold out of four of our 12 developments this year. To respond to the trend, we are set to open 10 new Phoenix housing communities in the next six months.
Evidence continues to mount that Phoenix’s residential real estate market is on the mend, but experts are taking a wait-and-see approach before calling 2012 the year of the recovery just yet.
No doubt, the market’s performance in the first half of the year produced encouraging news. According to the S&P/Case-Shiller Home Price Indices, Phoenix topped the nation in annual average home-price growth as of May, with an 11.5 percent gain compared to a 1.0 percent decrease for the 10-City Composite and a 0.7 percent drop for the 20-City Composite versus May 2011.
Said David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, “It (Phoenix) was one of the hardest hit cities in the collapse, and prices are still more than 50 percent below their June 2006 peak, but the past five months have been positive for that market.”
Long-time Phoenix housing expert R.L. Brown noted on his website in July that May also was a good month for housing permits. New-home permits soared 129 percent in May compared to the same period last year. Builders – especially those with premium locations – are experiencing a resurgence in demand, prompting the need for additional homesites and driving land prices upward in areas of highest buyer interest.
Overall, experts agree the residential real estate market isn’t out of the woods yet. Serious issues remain on both the buy and sell sides of the housing equation, and the nation’s economy remains fragile, at best. Radar Logic, a real estate investment firm, predicts a few more months of price increases nationwide, followed by a “fairly aggressive decline” through the remainder of the year. CEO Michael Feder said he’s keeping a close eye on investor/buyer behavior, the supply of foreclosure properties in the marketplace and bank financing requirements.
Since no one knows for sure how the remainder of the year will play out, we are celebrating successes where we can and are taking a cautiously optimistic view of the future.
In what seems to be an ever-evolving story, real estate news headlines flood our feeds daily, presenting varied and sometimes conflicting perspectives. Fortunately for us, as a Weyerhauser Real Estate Company (WRECO) homebuilder, Maracay has access to some of the top experts in the field, who help us – and, consequently, our buyers — make sense of it all.
Recently, WRECO President Peter Orser shared some interesting industry news with us following his attendance at two real estate events, offering a helpful look into both the local and national residential markets. He writes: “For me the biggest takeaway was a confirmation that across the board this industry is seeing the beginnings of a recovery– we are not out of the woods and our fragile state could be rocked by any major event, but today the sun is shining.” Sounds like good news to us!
Orser relayed a scenario in which prices are likely to go up faster and volumes slower than the general public may think. Interestingly, a shortage of finished lots in the most desired locations may be the culprit. During the recession, it did not make financial sense to build new lots and capital was not generally available. As a result of the necessary lead times, there is now a shortage. Compounding the predicament, most major markets are selling at rates beyond expectations — Phoenix, for example, is selling at twice last year’s volume. As a result, demand in Phoenix is actually exceeding the supply of buildable opportunities, resulting in price increases, overall.
As the first market to show such significant signs of recovery, Phoenix remains a leading indicator of buyer behavior for the rest of the nation. A survey of local builders affirms that both traffic and demand have remained steady throughout the summer. However, in some areas, builders are using price to slow sales. Here’s why:
Trade shortages cause delays: Significant trade shortages have challenged builders’ abilities to efficiently and effectively deliver homes, so many are slowing new sales as they try to catch up. Fortunately, with our sales on a steady rising pace, this has not been characteristic of our projects, overall.
Protecting limited lot supply: In many cases, builders have very few lots remaining in their top-selling communities and are reluctant to let them go, thus turning to price increases and limited-release strategies to slow sales. For us, acquiring land has been a top initiative.
Profits are impacted: Builders who sold aggressively during spring of this year face rising costs that will erode the profitability of upcoming closings.
Orser confirmed that the overall outlook for Phoenix and the nation at large is overwhelmingly more positive than it had been just one year ago. Being aware of the trend and ahead of the curve is all we can do to remain on the rising side of our local real estate market. So far, so good.
After a 5-year estrangement, U.S. homebuilders are becoming reacquainted with an old friend: confidence.
According to information from the National Association of Home Builders, builder confidence in the market for newly constructed, single-family homes rose six points to 35 on the NAHB/Wells Fargo Housing Market Index for July. It was the largest one-month gain the index has seen in nearly a decade, and marks the highest point for the Housing Market Index (HMI) since March 2007. Builders’ renewed optimism is based on improvement in current sales conditions, future sales prospects and prospect traffic, among other factors, said Barry Rutenberg, NAHB chairman and a Gainseville, Fla., homebuilder.
Though every region in the United States posted HMI gains in July, builders in the West appeared to respond most enthusiastically to the monthly survey on which the HMI is based. The West registered a 12-point gain, to 44 on the index, followed by the Northeast, the Midwest and the South, whose totals were 36, 34 and 32, respectively.
“Combined with the upward movement we’ve seen in other key housing indicators over the past six months, this report adds to the growing acknowledgement that housing – though still in a fragile stage of recovery – is returning to its more traditional role of leading the economy out of the recession,” NAHB Chief Economist David Crowe said in a statement. “This is particularly encouraging at a time when other parts of the economy have begun to show softness, and is all the more reason that the challenges constraining housing’s recovery – namely over-tight lending conditions, poor appraisals and the flow of distressed properties onto the market – need to be resolved.”
New-home sales in the West posted modest gains of 2.1 percent in June, compared to an overall decrease of 8.4 percent nationwide from the previous month, according to figures from HUD and the U.S. Census Bureau. Meanwhile, the inventory of new homes for sale remained virtually unchanged in June at 144,000 units nationwide, which represents roughly a 5-month supply at the current sales pace.
The Phoenix real estate market has boasted particularly notable numbers as area home prices lead the nation with a 14.7 percent jump in May, followed second by Houston which saw just a 3.5 percent gain. True to trend, Maracay Homes has seen both a steady and significant rise in new home sales from recent months and certainly, year over year, especially in our Phoenix-area communities. After years of dismal news, we’re thrilled to see an uptick and look forward to the reports of the real estate rise that are surely on the horizon.