The Wall Street Journal is reporting a slowdown in newly built homes since last summer, as home builders are starting to balk at prices. Since the housing market began recovering in 2011, investors have been bidding up prices for finished lots. But with new-home sales and prices cooling, some builders have been renegotiating their land options to get lower prices or even walking away from the deals.
The home market took a downward turn last summer, as buyers were spooked by double-digit percentage increases in new-home prices and a 1 percentage-point increase in interest rates between May and September.
As a result, land prices have lost some of their upward momentum, and according to the Wall Street Journal are actually declining in some markets.
Meanwhile, Scottsdale-based, Meritage Homes, canceled two land purchases in the Phoenix area in August and September after spending more than $10,000 each for plat studies. Conclusion: The parcels’ prices were too high absent larger gains in home prices. “We just didn’t see the home-price appreciation in those markets,” Michael IlesCremieux, regional vice president of land was quoted in the Journal.
Locally, Will White with Land Advisors Organization of Tucson told us, “After 18-months of ‘fast and furious’ lot sales, it’s natural to have deceleration.” White predicts that the finished lot supply in 2014 will become even more critical as demand continues to outpace supply. "Tucson has seen some cancellations as well, however with new homebuilders entering the market in 2014 those positions are being picked up quickly," said White.
The full story, Land Prices Hit the Brakes can be found here before being archived.