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Gilbert homeowner Raul Harris is the unfortunate bearer of two mortgages. For months now, the local loan officer has been trying to sell his four-bedroom home in the massive Seville development, where builders are still active. A major part of the problem, Harris said, is that builders are dramatically slashing prices to off load homes that are finished but unsold. "You can't really compete," he said. Sellers like Harris are squaring off against builders in new subdivisions throughout the East Valley's outlying areas.
Builders say homeowners aren't asking realistic prices. But many owners can't afford to drop
prices because of the steep prices they paid for their homes a year or two ago, said John
Fioramonti, who tracks the Valley's new home market for research firm Hanley Wood Market
Intelligence. What some sellers are asking may be unrealistic in terms of current market prices, but it's not unrealistic when it comes to their financial situations, Fioramonti said.
"They're just trying to get what they have in the place," he said.
Others might also be inexperienced and not understand that the value of a home can go down, Fioramonti said.
Some are still hoping to get the prices their neighbors got when they sold at the market's peak, said Shawn Stagg, an agent with real estate firm HomeSmart.
Sellers can't compete with the allure of owning something new, especially when builders are
offering huge incentives, Stagg said.
"They're just being crushed by home builders," he said.
Harris paid $569,000 for his 2,700-square-foot home about a year ago and put it on the
market for $575,000.
"I'm being realistic, especially when I owe the bank," said Harris, who purchased another home in December.
Builders in his neighborhood are selling similar homes in the high $400,000s.
Investors are also impacting the ability of homeowners to sell, he said. An investor sold a home across the street for $408,000, though it didn't have a pool or upgrades, Harris said.
Traditionally, new homes tend to be a bit pricier than resales, Hanley Wood's Fioramonti said. But big builders have stockholders to answer to, and every speculative home that goes unsold is a negative on the balance sheet, he said.
Some of the new homes are also bare bones with no window coverings, landscaping or covered patios, Fioramonti said.
On a $160,000 home, most buyers will spend an additional $16,000 to $20,000 on upgrades,
he said.
"That's another incredibly huge profit center for the builders," he said.
At Montalbano Homes, homebuyers typically spend anywhere between $20,000 and $35,000
on upgrades, said Jon Baer, vice president of sales and marketing for the Scottsdale-based
company.
But many of the speculative homes Montalbano is trying to sell in its Estates at Skyline Ranch
project in the Queen Creek area already have upgrades, Baer said.
That's because many buyers couldn't sell their own homes and walked away from contracts, he said.
"The builder is stuck in a situation where now we have to find a new buyer," he said.
Montalbano has 16 speculative homes left to sell in Skyline Ranch. It's average price per square foot is $109.44 compared with $112.93 per square foot for existing homes in the area. Brand new homes that are built to buyers specifications cost more, Baer said.
Still, builders are more aggressive on pricing, he said. Many also offer to pay closing costs or mortgage payments for the first year, Baer said. "They're pricing the homes to market pricing," he said.
Meanwhile, despite difficulties selling his Seville home, Harris remains optimistic - expecting the market to pick back up in a couple of years. New home building has finally slowed, and Arizona remains one of the fastest growing states nationwide, he said. So for now, he's renting the place out. Sellers need to be patient, Harris said. "If you couldn't afford to buy a half milliondollar home, you shouldn't have bought it," he said. "Or stay in it."
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