The federal homebuyer tax credit helped new home sales in metropolitan Phoenix, but it was only a temporary boost.
Real estate analysts RL Brown and Greg Burger have updated their forecast for home building in the region during 2010. Despite the increases in new home sales during the months before the tax credit's June 30th deadline, the publishers of the Phoenix Housing Market Letter aren't changing their earlier forecast for home building in the area. The pair still expects 8,500 single-family permits for new homes in metro Phoenix this year.
That level of new home permits will make it the slowest year for housing construction in the Phoenix area for decades. Last year, there were 12,500 housing permits issued in metro Phoenix.
Through the first half of this year, 4,118 home building permits were issued in the region. That figure includes the increase in new home sales due to the buyer tax credit.
Permits dropped to 583 in June, the lowest monthly level so far this year.
Burger said resales must fall significantly in metro Phoenix for home building to really climb.
“There's not much more room for builders to bring new home prices down to compete with the foreclosures being resold by lenders,” he said.
The median price of a new home is now $195,736, compared to $214,000 at the beginning of the year.
To survive Phoenix's housing crash, builders have already cut their costs and home prices to compete with foreclosures. If resales prices continue to fall due to foreclosures, it will make it even tougher for the new home market to compete.
New home lot prices have already begun to climb in some areas, where buyer demand is the strongest. Home lot prices in parts of Gilbert and Chandler have tripled in the past few years.
Brown and Burger definitely expect the region's new home market to improve next year. Their forecast is for a 45 to 50 percent increase in home building during 2011. By 2012, they see home building permits climbing above 20,000.
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