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Home
builders, neighbors offer stiff competition By
Carl Holcombe and
Lisa Nicita The
Arizona Republic
Following
decades of growth measured mostly in new prisons and mobile
homes, any cooling hitting the
Pinal
County
home market is a matter of perspective. And from the existing
homeowner's perspective, it hurts.
After last year's record 18,749 single-family new-home
building permits issued by Pinal County and its
municipalities, 2006 is on pace to see 16,571 permits issued.
Although at first blush that may seem to fit the perception of
a cooling market, it still means more new homes in a single
year than the county saw during some entire decades of the
20th century.
"This is a cooling like it was 113 degrees yesterday, and
its 106 degrees today," said Jordan Rose, a development
attorney with clients in
Pinal
County
. "It's still burning hot in
Pinal
County
."
But to get new
residents into all those new homes, home builders have
recently started slashing prices and offering perks from free
pools to cabinet upgrades.
And existing residents, from the investors determined to still
make big bucks to overleveraged homeowners who need to sell at
a certain price, are feeling the fallout. It is now not
uncommon for buyers to get a better deal on a new home than on
the 2-year-old version of the same model down the street.
Similar themes are likely playing out in the newer
neighborhoods of fast-growing areas of
Maricopa
County
, like east
Mesa
, south
Phoenix
and the
West
Valley
. But in
Pinal
County
's newest and fastest-growing communities like Maricopa and
the Santan area, where nearly every house is either brand new
or no more than a few years old, it's being seen on nearly
every block of every neighborhood.
As a result, resale-home sellers are grudgingly cutting
prices by tens of thousands of dollars, and their homes are
still sitting unsold for half a year.
Titus and Angel Metzger put the Maricopa home they bought in
July 2004 on the market in January so they could move up to a
bigger home in the western Pinal County city. A second real
estate agent and $40,000 in gradual price cuts later, they
still have a Century 21 sign in front of their home and only a
few lookers have stopped by.
"If we're not able to sell it, we can't have two
mortgages," Angel said. "So, we'll have to sacrifice
the new house."
Ironically, builder D.R. Horton has slashed the price for the
larger new home they want to buy, making it now cheaper than
what they're asking for the smaller, older home they're trying
to get rid of.
The Metzgers said it would be hard for them to cut their
asking price much more than the current $229,000. If they get
their asking price, they'll walk away with $30,000.
Bob Rucker, president of the Arizona Regional Multiple Listing
Service, said 4,403 homes were listed for sale in
Pinal
County
recently, with the vast majority being resale homes.
Sales volume for existing homes has fallen for the past four
quarters, while previously surging median prices slipped by
$10,000, to $211,500, from fourth-quarter 2005 to
first-quarter 2006.
Santan-area resident Karen Marsh put her 2-year-old home on
the market in April and has seen only a handful of people walk
through.
"It's just so frustrating," Marsh said. "We
finally quit doing open houses because we would have to go out
for the day and no one would show up."
The market is pitting Marsh against her neighbors. There are
six other homes for sale on Marsh's block alone. According to
a neighborhood real estate Web site, there are nearly 250
homes for sale in Marsh's San Tan Heights development.
On top of that, there are brand new homes being offered just
blocks away.
"I think part of the reason is we're out so far, and with
gas prices, people just don't want to because of the prices of
gas," Marsh said. "I figured it would take a little
while, a month or two, but not this long."
Scott Helsel, a Maricopa real estate agent with Prudential
Arizona Properties, said builders are knocking prices down by
$100,000 in some cases to attract buyers and offering real
estate agents up to nearly 10 percent commissions.
Such aggressive tactics are scaring homeowners struggling to
sell, Helsel said.
"For sellers, it's a shocking thing," he said.
"They think they're losing money when they're really just
making less. Ultimately, (lower prices) will attract people
back to
Pinal
County
."
Banking on that, speculators are still snatching up vacant
land and developers are still expected to build thousands of
new homes in
Pinal
County
this year.
The new-home sales-market volume was up in first-quarter 2006
compared with the same period in 2005, as was the median
new-home price.
After five straight years of increases, midyear numbers show
that
Pinal
County
and its municipalities are on pace to issue about 2,000 fewer
single-family building permits in 2006.
"There's no question about it,
Pinal
County
is in a cooling period like the rest of the metropolitan
area," Valley housing analyst RL Brown said.
He said after 2005's big price bump, buyers are now more
patient and waiting for bargains. They're in the driver's seat
because so many owners are trying to sell, leading to a glut.
Jay Butler, director of the Arizona Real Estate Center at
Arizona
State
University
, said part of the reason for the glut of resale homes on the
market may also be because
Pinal
County
was more affected by investors who bought houses hoping to
make a killing and are artificially keeping their asking
prices high.
Entry-level home buyers have been hurt by surging prices and
frustrated by rising mortgage rates, limited shopping
opportunities, high gas prices and congested commutes, he
said.
"The big issue is that prices were up,"
Butler
said. "They have to make them more affordable."
Developers and community leaders agree.
Developer Stacey Brimhall, president of Langley Properties,
also said investors in homes drove up the market.
Now, he said, people are looking to buy homes they'll really
live in.
He sees transportation problems as a long-term market killer
in areas of
Pinal
County
such as Santan, but he predicted the overall county housing
market will reheat as home prices stabilize.
"We're kind of like spoiled children in a toy store, and
we're throwing a fit and stomping our feet when Mommy finally
said, 'No,' " Brimhall said
Pinal
County
is still the future of the Valley's housing market,
development attorney Rose said. It will attract about half of
all new home buyers over the next 15 years, she predicted.
She said what's happening is a reality check for home sellers,
buyers, builders and developers as they return to a focus on
home affordability in the youthful market.
Realty
agent's status climbs
Scott Helsel never
figured on being a real estate agent.
But Prudential Arizona Properties has been lucrative for him.
Especially with home builders in the Maricopa area so
desperate they're offering real estate agents double or triple
commission rates to bring them clients, knocking prices down
by tens of thousands of dollars or tossing in free pools and
other upgrades.
Home builders were so confident last year that many stopped
offering commissions for real estate agents to bring them
buyers.
"This year, they really need us," said Helsel, a
Maricopa resident. "They're giving us lunches and gifts.
If they want to pay a 7 percent commission, sure I'll take
it."
But although the home-builder side of his business is up, the
homeowner side has slowed.
He said homes now linger on the market 90 to 120 days, instead
of selling in a matter of weeks, as home sellers battle to
maintain their lofty prices and builders offer sweetheart
new-home deals that undercut them.
Helsel said his clients aren't yet desperate, but some are
becoming frustrated by having to slash their resale home
prices.
Santan
house sits for months
Karen Marsh has
lived on pins and needles for months. Every time the phone
rings, it could be a potential buyer. But only three people
have gone through Marsh's house since it was listed in April.
She struggles to keep her house tidy with three kids running
around. She has repainted all the rooms white. And, recently,
she dropped her listing price $30,000.
"It's just so frustrating," Marsh said. "We
finally quit doing open houses because we would have to go out
for the day and no one would show up."
Marsh and her family have lived in San Tan Heights, in the
Santan area of
Pinal
County
just south of Queen Creek, for about two years.
They were shopping when the market was hot, their house in
Illinois
was already sold and they had two days left in the trip to
find something.
"That's why we came out this far," she said.
Now, they want to move to
Chandler
because of the schools and the commute to the airport for
Marsh's traveling husband. But they're competing with their
neighbors to sell.
"On my block alone, there's got to be six houses up for
sale," Marsh said.
Sales
director set to compete
Lorie Keller
prepared her staff at
Florence
's Anthem at Merrill Ranch two weeks ago for life on a
competitive sales floor. The 3,200-acre community was about to
open for public sales, and Keller is director of sales for the
Parkside edition of homes.
Merrill Ranch began selling homes strictly from an Internet
interest list on April 15. From the list of about 10,000
interested people, Keller said, 210 purchased homes.
"For all of April and May, it was really high
demand," she said.
But she said sales have calmed down a bit in recent weeks. She
said her sales staff is beginning to see the market shift as
prospective buyers come in with less equity than they had
hoped from the houses they are moving from.
Still, she said she is not concerned about interest in Merrill
Ranch. They just need to smooth out the logistics of getting
people into a house that is right for them and their budget,
she said.
"We feel it. I can't say we don't," she said.
"I'm not worried people don't want to be here. I know
they do."
Investor
takes long-term view
Cool down. Warm
up.
It doesn't matter much to investor Dana Byron, as long as any
downturn doesn't become so frigid that he can't find occupants
for his seven rental homes, including five he bought in May in
Maricopa, Queen Creek and the Santan area.
The
Rochester
,
N.Y.
native has done well enough, since he bought his first home in
2001 in
Peoria
, to leave a grocery warehouse administrative job and focus on
real estate.
"For me, the thought of punching a clock for 40 hours a
week until I'm 65 is annoying," Byron said.
He recommends sound money management to cover an unexpected
crisis like sudden repairs, finding quality tenants, and not
fretting over the little things like collecting rent that is
lower than monthly mortgage payments. "You can't be upset
you lost $200 on a rental when you made $10,000 in
equity," he said.
He said many investors and homeowners have become used to big
gains and are panicking over the market unnecessarily as it
tries to find normalcy. Byron said renters help build his
equity and ability to hold on to properties longer so he can
sell when prices are more favorable.
Maricopa
residents face stiff competition
When Titus and
Angel Metzger paid $135,000 for their 1,480-square-foot
Maricopa home in July 2004, they never envisioned 2005's
run-up in prices.
When they refinanced their house into a $174,000 loan, they
couldn't have imagined 2006's market cooling.
Now, they're in a pinch.
They've been trying since January to sell their corner-lot
home in time to buy a bigger new home in Maricopa.
"Have we had luck trying to sell? It's not even 'no.'
It's a big, 'Hell no,' " Angel said. "I'm ready to
put on a clown suit and stand on the corner and do
cartwheels."
They are facing stiff competition from other sellers,
including three on the other corners, and builders offering
incentives and price cuts.
They have gradually whittled their original asking price of
$269,000 down to $229,000.
Open houses have attracted fewer than a dozen lookers.
Ironically, builder D.R. Horton has slashed the price of the
new 2,200-square-foot home they want from about $300,000 to
$215,000, cheaper than the smaller, older home they're trying
to sell, and offered a $10,000 down payment if they finance
through the builder's preferred lender.
"They wouldn't drop the price $80,000 if they weren't
desperate," Angel said. "That tells me
something."
They hope to sell within the next few weeks to avoid losing
their $5,000 deposit on the new home.
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