I have been reporting how the market turned dramatically last year. This year New Homes are making their come back. As the resale market jumped 25-30% in value over the past year, New Homes make sense again.
I have recently sold homes in 3 of the 4 corners of metro Phoenix, with 4 homes under construction. Here is what I found in Gilbert, Cave Creek, Peoria and Surprise. Buyers are flocking to these new home subdivisions. Many of the subdivisions are selling out. One in Surprise had sold 60 homes over the past 3 months. They are raising their asking prices. One I sold in Gilbert had raised the price $2k from the weekend when we first looked, to Monday when we went back. Now it is up another $15k, 30 days later, to a base price of $317,990.
According to RL Brown as reported in the AZCentral blog by Catherine Reagor:
Housing analysts RL Brown and Greg Burger recently updated their market expectations for homebuilding in the region. The publishers of the Phoenix Housing Market Letter say the most “probable” forecast for new home sales this year is 10,000. That’s up from 7,100 sales last year.
In 2013, the new-home market is expected to grow to 15,000 sales. Their forecasts call for 21,000 sales in 2014 and 28,000 in 2015.
Brown said if the economy cooperates and corporate America creates new jobs, then metro Phoenix’s housing market will be one of the best in the country.
The analysts expect 14,000 new-home permits will be issued this year and 16,000 in 2013. The homebuilding market is projected to grow to 22,000 permits in 2014 and 29,000 in 2015.
Research from the National Association of Home Builders shows that two to three jobs are created for every new home built.
Metro Phoenix’s homebuilding market was decimated during the crash. Permits went from a record 64,000 in 2006 to 7,000 last year. Overall, more than 200,000 construction jobs were lost during the recession.
So, I have been incorrect reporting we built 10,000 homes last year in metro Phoenix, we actually only built 7,000 homes. They are forecasting 10,000 new homes built in 2012, I bet it is beaten at 12,000 new homes this year.
Remember each new home equals 2-3 permanent jobs and 1 ancillary job. So, 3-5,000 new homes this year means an additional 9,000-20,000 new jobs for the valley.
I know what these small business construction guys will go through. As I came out of my bust over the last few years. They will hire more workers, fill office space, buy new equipment and business will prosper.
Then they will pay off excessive remaining debt if they didn’t already BK because of the crash. Replace that old vehicle with new, buyer themselves and their family new clothes. Remember, most of these people have been living on the SKINNY over the past 5 years. Everything they own is worn out. This will lead to a boom in consumer spending adding more jobs.
Hundreds of thousands of homes were bought by investors during the housing crisis. They have made a fortune on their investments. I know of an investor that just sold a hedge fund $2.3 million dollars worth of homes he picked up, remodeled and rented. It was around 1,200 homes. He just made a $1 million dollars. Does he do a 1031 tax exchange into another investment and not pay taxes or just pay the taxes and have $750,000 to spend or invest.
My point here is that over the 5+ years 10’s of thousands of investors are going to have the option to liquidate their investments at huge profits or pull cash out. Remember, many on these homes were bought with cash. So think of this, investor buys 10 houses with $500,000. They are now worth $1,500,000. If you even question this possibility, call me and I will show you how they did it. I have guys that have done better. Anyway, so this guy refinances at 70% loan to value. Now he has $1,050,000 to invest TAX FREE!
JOBS JOBS JOBS! I fear I have gotten off track again.
By the time we get back to building the 35,000-40,000 new homes needed in the valley to offset population growth, second homes and relocation; we will have created 100,000-125,000 new jobs.
We don’t want a construction based economy, this will just be a portion of our economy. This portion disappeared due to the financial crisis. It will return next year and be in full bloom within 3 years max.
Here is my real estate market reportzz;
480-652-2004