Home-building permits in metro Phoenix jumped last month in the first significant increase in single-family home construction in several months.
While the increase doesn’t signal an end to the current housing slump, it does show the success of builders who have survived the downturn and found new niches that are drawing buyers, said Arizona housing analyst RL Brown.
There were 622 new-home permits issued across the metro area in April, compared to just 390 the previous month, according to Brown’s Phoenix Housing Market Letter. Monthly new-home-permit tallies have been hovering around 300 since last winter.
Home building slowed significantly last year as demand from buyers waned. Builders tried to hold on to lots and sell speculative-built homes, but up to 100 area builders became casualties of the recession.
Among those that didn’t make it include prominent local firms, out-of-state builders that closed Arizona offices and small boutique builders.
“No one is talking about just how many builders have left town,” said Brown, who has been tracking the Phoenix area’s housing market for four decades. “But the number is big. Most of the builders have just faded away.”
The 30 biggest builders in the metro area have historically accounted for 70 to 80 percent of all the homes built in the area, said Nate Nathan, president of the Scottsdale-based land brokerage Nathan & Associates.
“Now, several of those big builders are broke and gone,” he said. “The publicly traded builders have written land down, which allows them to sell homes but not make a lot of money. It’s tough, but there are survivors.”
Surviving builders had to find new strategies.
For instance, Scottsdale-based Meritage Homes is dropping its prices and cutting back on amenities to sell homes at prices that compete with homes that went into foreclosure.
“The days of the McMansion in metro Phoenix are long gone,” Brown said. “Builders must find neighborhoods and new-home designs that people can afford and will buy.”
Builders who have cash or can get financing have plenty of new-home lots to choose from now.
Lot prices are down more than 50 percent in most new neighborhoods, and the median new-home price in metro Phoenix dropped to $190,000 in April, compared to $200,000 in March and $288,000 a year ago.