New homes in metro Phoenix are selling at the briskest pace since the 2006 housing boom, but some of the buyers may not be as welcome in your neighborhood.
Investors are back in the Valley’s new-home market.
During the last boom, speculating investors snapped up a record number of new Phoenix-area homes as prices shot up, then dumped them fast when prices started falling.
Those investors played a big role in the housing market crash of 2008 to 2011. And leads us to watch what they're doing in today's hot market.
Investors in the new-home market are now adding to the demand and potentially beating out first-time buyers by paying cash, just as they have been in the resale market for the past few years.
The Valley's new home sales climbed 34% during October, compared to October last year, according to Belfiore Consulting.
“New housing supply remains tight, while demand is as high as any period since 2006,” Arizona housing analyst Jim Belfiore said. “We anticipate rapidly rising home prices for the next 12 to 18 months.”
He’s watching for for the impact investors could have on that new-home market.
On a recent visit to new subdivisions in the southeast Valley, Belfiore saw “for rent” signs on brand new homes.
A map of one subdivision showed a row of a dozen lots that didn’t have sold signs on them, but the sales agent told him “they had already been spoken for.”
That sales agent for the homebuilder acknowledged some of the subdivision’s homes had been sold to investors.
Investors were behind about 14% of metro Phoenix’s home sales this year.
That's nowhere near 2006 levels.
During the last boom, investors were behind at least 40% of all Valley home sales.
Bus loads of investors came to metro Phoenix from California and Nevada to buy new homes with as little as a few thousand dollars down because of the risky mortgages being made back then. Many bought more than one new home in a subdivision.
When the houses were completed, speculators flipped them for $20,000 to $60,000 more than they paid. The scheme fell apart in late 2006 when home prices stopped climbing 5% to 6% a month. Then speculators walked away from new homes because they couldn’t sell them.
Lenders foreclosed and those houses created zombie subdivisions left half built and almost empty on the Valley's fringes.
Many are leery of a speculator-led buying spree for new homes in metro Phoenix.
Belfiore shared what he found at some of those southeast Valley subdivisions with a group of Arizona home builders.
Some home builders said they weren’t seeing it, and others expressed concern.
Belfiore expects we will close 2019 with about 25,200 permits for new homes issued in metro Phoenix. Permits are a leading indicator for how many homes will be built.
He estimates 27,400 permits will be issued in 2020, 26,800 in 2021 and 28,000 in 2022.
Metro Phoenix's home building market has yet to recover from the crash. During the boom year of 2006, more than 60,000 new-home permits were issued.
Builders are more cautious this time around, and that's a very good thing for the housing market.
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