Home building, prices soared in 2004 (con't)

Instead, they put a total of $25,000 down and paid off their loans on a year-old Dodge truck and two jet skis. They're thinking seriously of buying another new house to turn into a rental.

"I said, 'Let's do something with that money rather than letting it sit in the bank,' " she said.

They will have plenty of emerging new-home hot spots to choose from this year. Areas to watch, according to Brown: a big stretch of land called Sun Valley, west of the White Tank Mountains; a sleeper spot on the western side of those mountains near the Loop 303; along Interstate 17 north of the Deer Valley Airport; and Laveen, Tolleson, Avondale and Goodyear.

"The Phoenix housing market is sitting in an advantageous situation," Gadi Kaufmann, chief executive officer of Maryland-based real estate consulting firm Robert Charles Lesser & Co., told a group of Valley real estate executives at an Urban Land Institute conference on housing last week.

He said the area's housing affordability will continue to draw new residents, but he cautioned home builders to keep housing prices from skyrocketing like they did in Las Vegas and California.

"Don't get greedy," he cautioned.

In California, prices have raced to such heights that many residents there are abandoning the state mainly to find affordable housing, according to news reports.

One of the favorite refuges is Arizona.

Las Vegas' price growth has backed off slightly from its searing pace of early 2004 but is still strong. Some home builders were overly aggressive and had to cut prices to bring them back within reach.

In the Valley, the reading on a key housing affordability measure by ASU hit its lowest level in November in 15 years, meaning it's more difficult for a typical buyer to afford a median-priced house at the prevailing interest rates.

If prices continue to soar and interest rates creep up, more prospective buyers will find themselves squeezed out of the market.

One key indicator to watch: the percentage of homes sold to first-time home buyers.

In California, the figure has dropped to 26 percent, the lowest in at least 24 years, according to the California Association of Realtors.

The Arizona Republic

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