“With 18 years of housing market data and analysis, there’s nobody else that knows any more,” noted Pinal Partnership chairman Willis Martin as he introduced R.L. Brown to the overflow crowd of business, government and industry leaders at the Pinal Partnership breakfast Friday. Brown and his son, Greg Burger, are the principals in the Builders Research Institute, L.L.C.; their analysis provides the foremost housing and development forecasts available in the market.
So many builders, developers, business and government leaders wanted to hear R. L. Brown that some 30 individuals were turned away at the door.
Brown was at Harrah’s Ak-Chin in Maricopa to offer a “Pinal County Housing Market Forecast.” He noted that his firm has been tracking activity here since 2002 with the genesis of Rancho El Dorado. “What you have seen take place is really phenomenal,” said Brown. “Things have changed in the market place here, which is really a reflection of the greater Phoenix housing market, but it is not doom and gloom. In reality, the opposite is true.”
The Pinal County advantage, according to Brown, was the strategy of offering “higher valued homes for less than in the southeast Valley.” He noted that 2005’s soaring land and home prices, as well as builder profits, were part of a record year everywhere that saw 17,012 housing permits in Pinal County as opposed to 1,000 permits in the year 2000. Permit activity peaked six or seven months ago and is now in decline. Builders have gone from a backlog to an inventory of houses.
What happened? According to Brown, “opportunity” buyers flooded the market, taking the opportunity to buy a home almost without cost. This solid citizen with a family, a house and a good credit rating put down earnest money, then got cold feet and canceled the contract. At the same time resale prices soared, in part due to the housing backlogs.
“Then prices hit the wall,” explained Brown, “and all but the buyers of necessity bailed out. And,” he added, “it doesn’t have a thing to do with whether it’s a good product or not.”
Housing supply now exceeds demand. In June housing permits were down 25%, by 16% in May, 21% in April and 24% in March. “Prices will stabilize as supply and demand reach a balance; in the meantime they will adjust. Different market areas will open,” noted Brown. “I hoped it would have stabilized by now, but probably it will take all year.”
Noted housing market analyst R. L. Brown.
“We need to react in a positive way,” exhorted Brown. “The first quarter of 2006 is still better for housing than any first quarter in 12 years (with the exception of 2005). It really shows the strength of the market!”
“We are prone to be very shortsighted,” Brown noted. “The consumer is scared and confused, but buyers need to be re-energized.” He urged developers to sell off their inventories, to reposition prices and products, to change the culture of government from power brokers to problem solvers, to re-establish the relative affordability of housing, which is why people came to Pinal County, and to identify “centroids” of activity and plan for them now.
Transportation and infrastructure problems require immediate solutions, according to Brown; “We need to innovate; we can’t wait for solutions to be planned, studied and funded, or, otherwise, the consumer gives up. All things aren’t going to develop equally,” Brown explained. “The impetus needs to be on looking forward, not back.” Water planning and a partnership with the tribes, looking at serious development on tribal lands, are two other necessities.
Failure to address these issues, as well as the impact of global events and skyrocketing mortgage rates are what Brown calls “deal busters,” leading to a faltering economy. “Solve the problems,” he urged, “or ring your hands, and you’ll be toast.”
Following his presentation, Brown took time to answer questions and to chat with friends in the housing industry.
Brown sees the major growth in this area going to the south and east of Maricopa. He sees continued population growth in Pinal County because, he says, “People will make a sacrifice for value. They will drive ’til they qualify.” He forecasts a strong regional economy with prices normalizing in six months and an improved resale market, but builders and developers have to initiate new, aggressive marketing efforts. “The Pinal County market is just beginning to develop and mature,” noted the analyst.