July
2010
New Homes: The Historical
Picture
An over-supply situation became undeniable when our market
exceeded the historical record for specs in January 2006, and it has continued
in that mode for about three years.
Since then the New Home subdivision count has moved back into a more
typical range. This article provides you with a historical perspective of the
New home market so that you can view the current market in the big picture.
Seven-Year Subdivision Count
The first two years of the seven-year graph below shows a
normal ebb and flow of active subs; the count climbs in late spring, when
builders are preparing for the summer when sales are typically higher, and
declines a little in late summer.
In 2004 and 2005 the active sub count dropped dramatically with the
investor/speculator boom, when new subdivisions could not be brought on-line as
fast as active subdivisions were selling out. The lowest count was 482 active subs in May 2005.
The sharp increase in the number of subdivisions from June
2005 through September 2006 can be attributed to builders ramping up to fill
the inventory gap created in the months prior and then overshooting the mark
because of significant changes in demand.
After a few months or relative stability, demand fell off further, and
the count climbed again. Since the
end of 2007 the subdivision count has been declining on a regular basis. That market contraction has now reached
the bottom.
UIS
defines an active subdivision as one accepting contracts from qualified
buyers. The subdivision count data
we report comes from the Ultimate
New Homes (UNH) database, which covers the entire Phoenix metro market
area and approximates the area covered by the Arizona Regional Multiple Listing
Service (ARMLS). Ultimate
New Homes covers all of Maricopa County (74% of UNH subs) and significant
portions of Pinal County (23% of UNH subs) as well as a few location
outside of these counties (primarily in Yavapai County) (3% of UNH
subs).
Six-Year Spec Count
The Ultimate
Information System (UIS) spec count is made up of the individual properties
that each subdivision chooses to report to be included in the UIS system for
ARMLS affiliates. The degree of completeness varies from builder to
builder and from one subdivision to another. We believe our 2006, 2007 and 2008 count was on the
conservative side, as many subdivisions do not report their total spec quantity
to us.
We have compiled comprehensive spec data only back through
October 2004. Prior to that our
data is more spotty, but we know that the highest historical spec count was
2,400 in May 2003. Even with this
partial data, a pattern is readily apparent. The spec count maintained a normal level throughout 2004,
and fell sharply in 2005 during the speculation boom when supply was unable to
keep up with demand. For a year
after August 2005 the spec count climbed rapidly and then remained at an
extremely elevated level for 24 months.
In the first half of the last year the spec count has fell by about 30%
but for the last six months has leveled off.
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