Saturday, December 4, 2010

Projections low for Phoenix new-home sales in 2011

Phoenix-area homebuilders aren't likely to experience sales growth in the coming year despite early signs that the local economy is improving, according to a group of housing analysts, real-estate brokers and homebuilding executives.

In particular, the first half of 2010 will be difficult to match, they said, because a federal income-tax rebate of up to $8,000 spurred a large percentage of this year's sales. That rebate is no longer available.

The economic outlook for Valley homebuilders was among several real-estate-related topics experts discussed at "The Road to Recovery," a forecast seminar Wednesday in Phoenix sponsored by the Scottsdale-based Land Advisors Organization.

Overall, the experts predicted a slow year for new-home sales, based on the lack of first-time-buyer tax incentives and the continued financial difficulties facing so-called move-up buyers, which include negative equity in the homes they currently own, excessive debt and bad credit scores.

"Many of our move-up buyers are so deeply underwater that they can't even imagine buying a house during the next few years," said Jim Belfiore, a Phoenix housing-industry analyst and a panelist at the event.

"The next few years are going to be tough," said Belfiore, president of Belfiore Real Estate Consulting.

Liesel Cooper, Arizona division president of homebuilder KB Home, another panelist, agreed that the near future will continue to bring challenges, including competition from investors buying and selling inexpensive, recently foreclosed-on properties.

"We're competing against the stuff we built during the boom," Cooper said.

One potential bright spot, if the state's economy continues its current, gradual recovery, is that former homebuyers foreclosed on in 2008 may be eligible to buy another home, Belfiore said, based on an estimated three- to five-year period of ineligibility following foreclosure.

The outlook for investors in existing homes is considerably better, according to speakers at the conference, because the Phoenix area's growing population of foreclosed-on families has created an increased demand for rental homes.

"We've got a huge shift of population moving into rentals," said Mike Orr, a real-estate analyst based in Mesa and one of three featured speakers Wednesday. "It's not a voluntary movement."

Orr, owner of Cromford Associates LLC, produces a daily report on the real-estate market known as the "Cromford Report" that is read by many local investors and real-estate professionals.

He said most investors in Phoenix-area homes are hanging on to their properties and leasing them to area residents, even those investors who initially planned to repair and resell the homes.

One reason, Orr said, is that, as demand for rentals increased, the pool of prospective buyer-occupants continues to shrink.

"There's very weak demand from ordinary people," he said about the homebuying market.

Greg Vogel, founder and CEO of Land Advisors, who organized and spoke at the event, said that the Phoenix area is a large and diverse real-estate market that contains both hot spots and dead zones.

Understanding this, many investors and homebuilders are focusing their attention on communities where the housing market has become relatively stable, such as the northwest Valley, while continuing to avoid areas of continued instability such as northern Pinal County, Vogel said.

He said reports about the Valley's excess housing inventory, which numbers in the tens of thousands, have not deterred investors because, as the economy improves, residents who lived with roommates or family will feel confident enough to move in to their own homes.

Vogel said he is confident Arizona will not lose its appeal to retirees, Californians, Canadians and others seeking affordable homes in a pleasant climate.

"People will be coming here," he said. "They always have, they always will."

by J. Craig Anderson The Arizona Republic Dec. 3, 2010 12:00 AM

Projections low for Phoenix new-home sales in 2011

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