Inventory dives again; weekly sales higher
Median price is still gaining
New home sales showing some strength
Pending Sales: 12,766 (+ 9 from last week)
Pending Sfam: 11,036 (+53 from last week)
AWC: 8,004 ( +68 from last week)
AWC Sfam: 6,964 ( +57 from last week)
Active: 13,610 ( -224 from last week)
Active Sfam: 10,557 ( -183 from last week)
Closed: 4/9-4/15 1,684 ( +245 from last week)
Closed Sfam: 1,398 ( +234 from last wek)
Median Price for April: $136,284 ( +$6,284 from March)
Ryness New Home Index: 1.06 ( .35 Same week in 2011)
New listings in April: 5,173
Housing stats continue to suggest a recovery in housing in Arizona. The inventory continues to fall as demand picks up, and it is pushing pricing higher. It is also pushing some buyers into new homes, and we are seeing a lot more strength in new home sales as well.
There is also a fair amount of anecdotal evidence that new home sales are improving. There was an article about one of our favorite submarkets, the Wittmann area in Surprise, about a builder who is seeing things picking up at his acre lot subdivision. Ripson Homes has been sitting on a stalled subdivision there for quite a while, mostly because the price he needs to sell at was just too much higher than the market. He is seeing some activity now, and that is a great sign for the area. All of his homes are going for $200K or more. We like this area a lot, and I have a number of acre lots and 5 acre parcels in the area that are ideal for a builder. We also can offer seller carryback on a number of them. This is the easiest place for custom builders in this area; the land is relatively flat and accessible, and you are only a few minutes out from Surprise town center right down US 60. If you are interested in finding a lot in this area, we have a number of high quality properties that you can find here.
There are getting to be other articles about home construction in the valley too, in the much bigger business of production construction. Last weekend, we came across this article in the AZ Republic. It is fairly clear of the direction we are moving; the Ryness Report that I quoted up the page is showing a much better new home sales market than the previous 5 years. Its not even in the same ballpark, and its been consistent this year. Investors have been chasing housing, and they have been a big part of the inventory reduction, but now that inventory is gone, where do they go? Houses are still good value, but they are not available cheaply or readily any longer. I think that new foreclosures coming on the market are going to be pressured by people who want to buy a home. Condos are pretty well sold down- there are very few available. This was also forecast by the way, you can go back to my 11/1/11 entry, and I talked about the fact that since inventory didn't end up growing in October, we would have have some rapid price gains and fighting for inventory come March, and we certainly have. We have inventory shortage, and we have rising prices.
Where does that leave an investor? If you don't have pockets deep enough to buy an office building, which might be the other alternative, land is still looking like a relative bargain. We have not seen land being pressured by investors yet, so it is still at a traditionally very low price. It fell as much as 90% in some areas, and it is still languishing at or near those kind of prices. There is not as much for sale as there was earlier from banks, but there are still opportunities. If you are a small investor, and can find a lot with utilities, and it is less than 25 percent of what homes in the area are going for, its probably not a bad deal historically wise. That is a number that builders would readily pay to build a home on. Right now, that is relatively easy to find that and even much less, and as home prices continue to rise, those numbers only look better.
I don't want to tie a recovery in land too close to the housing recovery, but how can you not? We saw this happen last fall with condos- its going to happen with land as well- it might not be as sudden or immediate, but look; custom home builders haven't even started up yet. This article about Ripson Homes in Surprise is a brand new situation, as it wasn't possible until prices rose high enough to allow him to turn a profit. (He is in to those lots for $80,000 each as I recall) We have lots with well shares out there for under $34,000, with seller carryback! If he can build a home and turn a profit there, what can a builder do buying a lot for less than half the price do? See, we are underpricing the "real value" of those lots as well, and we could very well end up selling them at much higher prices when the market realizes that the economic value is closer to $50K-$60K- that is the price they can buy a full lot, build on it, and still make money.
I had a number of people that I talked to who weren't interested in buying condos when they there $25,000-$30,000 last fall- now however, you can't find anything for less than $60K for the same type of home in east Phoenix. Land is going to function similarly when people start seeing there is a demand for these kind of lots from small builders, like Ripson.
There are other areas less developed, like the Hidden Valley area of Maricopa, where land is frightfully inexpensive right now, if you can find something of quality. Maricopa is growing, and custom builders who deserted it 5 years ago will come back, and we will see that area rebound. Buying a 5 acre parcel for under $50K would be a bargain to a builder who was going to use it, just as a $30,000 condo was a steal for someone who would live in it-or rent it out, for that matter. For that $50,000, a builder would get 4 lots- that's $12,500 a lot. Put another $25K in for a well, and you have a building lot for under $20,000. If he can sell a new home for $125,000 on an acre and a quarter, and the recent new home sales figures seem to show that he can, he will make money on the land. Its a numbers game, and as prices increase, there is profit to be made for a builder.
As far as this week's stats go, you can see the inventory falling. In April we tend to reach a peak on pending sales, as April is usually slightly quieter than March is, before rebounding in May and June. It seems to be that way again, but the difference is prices will be driven upwards. We can expect prices to be driven upward through June, at least. Demand might fall, but so might the sky, so there is no point worrying about it. Right now, we have almost normal market demand, critically low market inventory, and below "real economic value" prices. That's a recipe for price increases. We also probably (i say probably because I can't prove it) have a strong influx of people. This only increases the pressure on housing. This is why we are seeing the new construction start to ramp up, which leads to pressure on land prices. Its all cyclical, and land has not had its rebound yet, and right now it probably doesn't take my expertise to point out a parcel of land you can make money on; most stuff is underpriced. I still would talk to a good land guy or gal though, because you don't want to end up buying something that doesn't work for you. For every good deal on land, there are half a dozen bad ones. Buy a good piece, even if it costs you a little bit more, because it will be the one buyers want first when they are looking.
If you are interested in hearing more about Land, contact me and I will tell you about my favorite places to acquire quality property.
No comments:
Post a Comment