The Arizona Republic - December 2006
New numbers are in on the fallout from the investor home-buying spree in metropolitan Phoenix.
As many as 40 percent of the contracts on all the new homes in the Valley during 2005 and early this year have fallen through. That translates to 25,000 spec homes, according to a new survey from housing analyst RL Brown.
Many new-home deals fell apart because buyers couldn't sell existing homes. But there also were many investors who pulled out of new-home deals after seeing they couldn't flip the homes for hefty profits.
Speculators had a big hand in hurting the resale market, too. Many snatched up existing homes last year and are now trying to sell them for a profit.
Those extra homes for sale, by many people who never lived in them, have created a glut in some areas of the Valley.
Housing analysts say supply and demand in the resale market has to get back in sync before the home building market will rebound.
There were only 2,341 new-home permits issued in October; that's half the wild pace of 2005.
The drop in building is a good sign the market is working to absorb all the spec homes.
When the incentives on new homes start to drop and new-home prices stop their drop, then it's a good sign the home-building market is rebound- ing.
So if you are looking for the best deal on a new home, it might be now.
Fresh calculations
Based on home prices or what buyers are willing to pay dropping 10 percent in the past year, buyers who could have sold their home for $400,000 last fall would have paid $600,000 to move up.
Now, the same buyers should look at selling their house for $360,000.
But they can move up to the same bigger home they looked at last year for $540,000.
Those buyers actually would spend less money now.
