When times are rough and the fear of the unknown casts a gloomy shadow, what would you do? For many of America's leading home building companies, the reaction could be run and hide. Indeed, that's what most of them are doing, with an eye toward weathering the worst of housing's turmoil with as few losses as possible. For an intrepid and well-positioned few, however, it means jumping right into the game with confidence that the market will rise from the ashes of the downturn sooner or later.
That's exactly what three opportunistic, new-to-the-area home builders are doing in the Valley of the Sun, where continued population, household, job, and income growth encourage action even while the market stalls nationally.
These builders, Canada-based Mattamy Homes, John Laing Homes of California, and Pennsylvania-based Orleans Homebuilders, are taking that big leap of faith in Phoenix by entering a housing market that's been no stranger to its fair share of dark days.
That's why the burning questions are, "Why would any builder attempt to even step foot in a slip-shoddy market, especially during a time when the city has been experiencing faltering home sales, rising land inventory levels, and soaring home prices? Why would a builder want to enter Phoenix–especially amid a severe national housing slump?" Phoenix itself may have the resiliency to find its groove again, but the market still has plenty of battle scars left needing to heal.
It's a move some analysts would peg as risky.
Reflecting the widely held notes of peril, Raymond James Equity Research analyst Paul Puryear says in a May snapshot on Phoenix, "the weakness in the Phoenix market continued, as existing single-family home and condo sales declined 18 percent, year on year. More concerning, inventory, as measured on a month's supply basis, increased to 9.7 months compared to 8.7 months in March, and 6.0 months in the prior year."
But for these three fearless builders, the answer is simple. Phoenix has got potential to bounce back to life. Most analysts say they're confident the area's strong, continuous, robust economy, population and job growth will continue to be its backbone and saving grace.
Not only that, these rookie players truly believe in the market. They know Phoenix won't stay in limbo mode too long. In the case of Laing, Mattamy, and Orleans, they share a common game plan–stick with a long-term, cautious approach. That's quite the opposite of how the city's entrenched builders went all guns and glory in the past few years–going land-happy at the height of Phoenix's housing heyday.
Learn more about markets featured in this article: Phoenix, AZ.