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Phoenix housing market shifts to central areas

construction-renovationThe housing market in one of America’s largest cities is shifting as builders turn vacant lots and old buildings into new homes.

New houses and condo projects are starting to spring up on vacant parcels and in half-built subdivisions in Phoenix’s core communities as prospective buyers who want to live closer in are spurring builders to develop infill housing at the fastest pace in Valley history.

“There’s tremendous demand for infill in the right Valley locations,” Michael IlesCremieux, a vice president with Meritage Homes, told The Arizona Republic.

By percentage, growth of infill homebuilding is outpacing the rest of metro Phoenix’s new-home market.

About 200 houses were built in the region’s central neighborhoods in 2010. So far this year, 1,311 houses have been built, more than six times the number three years ago.

Real estate reports show infill projects in 2013 now make up almost 13 percent of the estimated total of 11,500 new-home permits issued through November.

New houses going up near the Metro light rail are selling within days and sparking bidding wars. For-sale signs posted on lots vacant for decades are being replaced by dirt movers and contractors’ pickups.

Phoenix City Councilman Tom Simplot, who is also CEO of the Arizona Multihousing Association, said many buyers don’t want to drive farther out anymore.

“Look around the central Valley,” he said. “New houses are going up and selling fast.”

Analyst RL Brown said competition for the best central Valley sites for homebuilding is bound to increase — meaning prospective buyers may be paying more, as well.

“Infill development is naturally constrained by the relative shortage of suitable land as well as the price of the land,” Brown said.

Infill projects have lured big builders, who see they can profit on smaller developments because buyers often are willing to pay more to be closer in.

Meritage was able to the raise the price of homes at its Madison Place development by $50,000 after restarting the project earlier this year. It was sold out in six months, and the company is now looking to start a similar development in Scottsdale.

In Phoenix’s Arcadia neighborhood, Rosewood Homes is wrapping up an 18-home infill project that had so much buyer interest that Rosewood had to run a lottery system, literally picking prequalified homebuyers out of a hat.

“In this down cycle, we were really trying to find some unique opportunities,” said David Kitnick, Rosewood Homes president. “After the collapse, you had to have a compelling reason to buy a new home. It didn’t make sense for us to just build more homes in suburbia. Those weren’t selling.”

Kitnick said he started looking for land opportunities closer to city amenities, in part because those neighborhoods were more stable and new-construction homes were rare.

Smaller builders are also finding their niches with eco-friendly and contemporary single-family homes aimed at young professionals who want to live closer to city amenities.

But the number of lots available for infill is dwindling.

Kitnick said he typically looks at 20 to 25 properties a month — two-thirds of which are infill or closer to a city center.

“It is a needle in a haystack to find these opportunities,” he said.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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