Delay in Getting New Homes Wearing on Buyers!

Delay in getting new homes wearing on buyers

Laborers in short supply

Glen Creno and Catherine ReagorThe Arizona RepublicSept. 29, 2005 12:00 AM

New-home shoppers' patience is being tested in metropolitan Phoenix. It's taking twice as long to build a home as it did five years ago, and buyers have fewer lots from which to choose.The number of permits for new homes issued in August fell 3.73 percent, to 5,548, compared with August 2004 after a more than 23 percent decline in July. Analyst RL Brown attributed the drop to builders having only a small inventory of lots ready for construction. He also said processing delays contributed to the slowdown, particularly in smaller cities in Maricopa and Pinal counties that are swamped by rapid growth.
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Home shoppers who win lotteries for the scarce number of lots find themselves caught in equity traps. Although the average wait is 210 days, they easily may have to wait a year or more for their houses to be built. Despite the aggravation, it is difficult to walk away from an asset that may gain thousands of dollars in value in that time.Builders and the subcontractors who construct the houses face labor shortages and higher costs of basic materials such as lumber, steel and concrete. The situation makes it more difficult to predict when a house will be finished.Doug Fulton, president of Fulton Homes, said the company tells buyers exactly how long construction is expected to take. Some are not willing to wait because of priorities like getting children in school. But demand for new homes is so strong that many buyers will tolerate the wait."In this weird environment that we are living in, people are happy to be picked and give us their money," he said. "It's no different when the concrete guy talks to me: 'What do you mean, negotiate price? You are lucky to get it.' It just works its way up the chain."Brown said it takes an average of 210 days to build a house in metro Phoenix. The industry, he said, prefers something like a 90-day building cycle. He said that 25 years ago, builders were knocking out houses in the Valley in an average of 75 days.Eric Brown, president of Artisan Homes, a division of Engle Homes, said it's a struggle to find enough labor to build homes. He also said builders are worried about what Hurricanes Katrina and Rita are going to do to construction material costs. "Construction time for new homes isn't going to shrink anytime soon," he said.Whatever the cause, the wait is wearing on buyers.Holly Hunter and her husband, Stephane Chartier, signed a contract for a $428,000 house in north Phoenix in February 2004. They were told they probably could move into the house in about seven months. They still are waiting, although the house is almost done.Subcontractors' problems with the slab, framing and plumbing delayed construction, Hunter said. But the couple also figures the house is worth $650,000 now. "This was our dream house," she said. "What they have slapped up is really disappointing. But you're at their mercy. You're not going to walk away from a gain in equity of $200,000."RL Brown, publisher of the Phoenix Housing Market Letter, said, "Once a consumer signs a contract, he has lost control. He is at the mercy of the builder who is at the mercy of the subcontractor who is at the mercy of suppliers. There isn't a builder out there that wants to take 30 minutes longer to build a house than he has to. . . . He doesn't get his money until it is done. It's the same with the subcontractors."The delays pushed some home shoppers into the resale market, which already was superheated due to investors who were blocked out of new subdivisions by builders. But there is evidence that the resale market is slowing to a more sedate pace as the number of listings increases along with the time it takes to sell. Brown said he viewed the slowing in the new-home market as a positive. He expects price increases to moderate, a good sign, he said, in a market that has made its reputation on affordability.