With the bad news about real estate permeating the news lately and homeowners still waiting for signs that the housing market is nearing its bottom - here is a bit of good news.
The "free" land that developers have been enjoying for months may be coming to and end. That means an end to developers offering these insane deep discounts to lure buyers to their new home developments (and away from resale homes).
Here is the how"free" land deal for developers works. It takes about three years for raw land to go from "desert to doorknobs". So, land being built on today had to be purchased about three years ago. Developers have most likely written off the value of that land long ago to compensate for their profits in 2004 & 2005. They are carrying it on their books at "zero" value.
The average cost of a residential lot in the Phoenix area is about $50,000. Thus it costs the builder essentially nothing to offer a $50K discount on his new homes.
That supply of "free" land is about used up and hopefully builders will soon no longer be able to afford to offer homes at these deep discounts.
This is good news indeed for all of us residential home owners who have seen the price of our homes depressed by new home builder discounting.
Maybe there is a light (of sorts) at the end of the tunnel.
Richard
Richard Haworth
Coldwell Banker Residential Brokerage
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Thanks for joining in the discussion.
Richard