Housing up, but it's not another boom
KINGMAN - New home construction is making a minor comeback after bottoming out in 2009, with 167 building permits issued through the first three quarters of the year and total construction value of $26.7 million, the city of Kingman building department reported.
It's nowhere close to the peak of 910 new home building permits and a more than $100 million valuation in 2005, but third-quarter numbers already exceed all of last year.
"It's a little better than last year," conceded Mike Hill, president of Hill Development. "It seems like every year gets a little better. It's nothing outstanding."
Hill Development will build about 19 new homes in 2015, all in the Southern Vistas subdivision off Hualapai Mountain Road, compared with 16 homes last year.
Doug Angle, president of Angle Homes, continues to see some increase in activity from prior years, but it's definitely not a housing boom. His closings are up about 10 percent from last year.
"Not sure that we are in a full recovery yet," Angle said. "We are seeing a number of buyers from California and the Midwest coming to Kingman. Our year-round climate and cost of living make Kingman attractive for many buyers."
Angle anticipates continued steady growth in new-home closings over the next three years, but nothing like the 2005 boom, he said.
Arizona was absolutely hammered during the financial crisis and Great Recession. Median home prices in the state plummeted 53 percent over five years from $250,000 in 2006 to $117,000. The foreclosure rate was the second-highest in the U.S. for three straight years as construction ground to a halt.
Homeowners found themselves "upside down" when their homes lost about half their value during the housing bust, but the market seems to have turned the corner in terms of pricing.
The average price for 107 homes sold in October was $130,330, up 24.4 percent from $104,737 in the same month a year ago, according to the Kingman Golden Valley Association of Realtors.
"I think we have seen our recovery," Dwayne Patterson of ReMax Prestige real estate said. "We do not want to go back to the prices we had during the boom. Those prices cannot be held up. I feel we need to hold with a 10 (percent) to 12 percent annual increase in values and that will give us a very strong market.
"The only reason we should see home prices increase by more than this is if we get major employers into the area that are paying above-average wages," he said.
As far as new home values, Hill said prices are going up a little, mainly due to increased labor and material costs. He's selling homes at $118 to $122 a square foot.
"The problem in Kingman is there's only so many people here to do the job as far as subcontractors," the homebuilder said. "They're raising prices a little bit because they've been doing it for nothing for so long."
Home values are rising, but they're still affordable, especially when mortgage interest rates are staying around 4.5 percent. Interest rates are expected to rise, with every percentage point increase adding $166 to the monthly payment on a $200,000 loan.
"The problem now is they're only appraising for so much," Hill said. "I don't blame appraisers. I blame the banks for holding back. People are willing to pay more. I ran into a couple situations where they [buyers] actually made up the difference."
The volatility of the housing market over the last few years has kept many potential buyers on the sidelines, creating pent-up demand that's starting to show up in Kingman and across the nation.
Led by a strong jump in single-family production, housing starts inched up 0.2 percent to a seasonally adjusted annual rate of 1.2 million units in July, according to data from the U.S. Department of Housing and Urban Development and Commerce Department. It's the highest level since October 2007.
"Our builders are reporting more confidence in the market, and are stepping up production of single-family homes as a result," said Tom Woods, chairman of the National Association of Home Builders. "However, builders are still reporting problems accessing land and labor."
The inventory of single-family homes available for sale in Kingman and Golden Valley is around 444, including about 333 "stick-built" homes, or homes that are not manufactured, Patterson said.
He counted 12 foreclosures and seven short sales, or homes offered for less than the outstanding mortgage balance, which is a low percentage for the overall inventory. Foreclosures and short sales made up half the market during the bust years.
"In my opinion, we have a very healthy market right now for single-family homes, with approximately a 4½-month inventory available, looking at our last three to four months of closings," Patterson said.
Sales are strong with 97 percent of listed homes selling and average time on the market of 108 days, the Realtor noted.