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Home builders unafraid to raise prices Weaker market not a deterrent
Weaker market not a deterrent
Jonathan J. Higuera
The Arizona Republic
Mar. 1, 2006 12:00 AM
The Valley's slowing housing market may mean the buyer is king again, but that didn't stop new-home builders from raising prices for their houses last month.
The average price of a new home in February rose 1.2 percent from the previous month to about $356,000, according to the latest issue of the Phoenix Housing Market Letter , published by Valley housing analyst RL Brown.
The increase, which averaged about $4,300, surprised even Brown, who has staunchly defended the Valley's home-building industry against reports of a major cooldown.
"If builders were thinking of empty sales offices, they clearly would not be raising prices by an average of $4,300," Brown said. "It's a demonstration that builders are not seeing anything out there that scares them."
At the same time, he acknowledged that more builders were using incentives to keep buyers motivated. Those incentives ranged from 3.75 percent interest financing options, to free pools, to furniture allowances and free "option" packages.
"Car dealers have mastered it as far as incentives, and builders are taking a page from them," he said.
Meanwhile, the number of Valley new-home permits issued in January slowed almost imperceptibly from the same period a year ago. It dropped less than 2 percent from January 2005, when the number reached 4,500 permits.
Last year, the Valley set a record for new-home permits issued despite a slowing in the fourth quarter.
"I think we'll see permits down in February, but I thought we'd see them down in January," Brown said.
The average price of new-home sales that closed in January dropped to $306,000, down from $310,000 in December, which was a record high. Those average prices are lower than the current average home price because the contracts were typically negotiated months ago, and they reflect sales prices at the time.
The local figures come a day after a national report said the backlog of unsold new homes across the country reached a record level in January. But the Commerce Department report did say sales in the West bucked the national trend with an 11.3 percent increase in sales.
Brown said he'll be looking closely at sales activity in new developments in the far reaches of the Valley as an indicator of the local market's strength.
"They moved out there originally because they saved a lot of money (even if it required a longer commute)," he said. "If the new buyers can't save a lot of money, they may not make that same trade-off."
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