Both the new and resale markets in metro Phoenix continued at just about the same pace that we have seen over the last several months, with new home closings sagging slightly and resale closings adding some velocity from sales of REO properties and the banks growing willingness to negotiate short sales for home owners in trouble. New home permits saw a slight uptick.

The table on the following page tells the story of this most recent data period in some detail, and is worthy of your perusal.

While the doomers continue to focus on the plight of those homeowners that are suffering from financial stress from job loss and payment resets, those observers and analysts with perhaps more savvy are seeing some solace in the fact that the market is absorbing as many of these distressed properties as it is, suggesting that the housing consumer that has been absent from the marketplace for many months is stirring as he perceives better values

This squares with the theorem we have expressed before that the market priced itself beyond both reality and the capability of its potential consumers, and killed the goose …. Helped along by easy money and near-universal monetary greed.

Later in these pages we offer a comparison of performance levels over several time periods for builders grouped separately by non-public and public companies. We can see just who has been impacted, and the degree that these market shifts have changed the fortunes of both types of builders.

We were amused by some recent press reports discussing the profitability or lack thereof of builders active today in our marketplace, suggesting that builders would soon be forced to stop building at all because they would be unable to build at a profit. Of course, that misses the reality that builders are indeed repositioning product and re-valuing land and lots to allow them to continue to build for the "new" market versus the market of 2005.

Homebuilder economics for 2008-2012 are dissimilar from home builder economics of 2005 … and only the most disconnected homebuilders would still be trying to operate under a 2005 scenario. Likewise, subcontractors and materials providers are also in the midst of re-crafting their product and pricing schemes.

With the shifts in credit criteria, the probability of higher mortgage rates in the near and mid terms, the loss of paper equity in the present stock of homes, and the general stumbling of the global and national economies, and the shifts in energy strategies, the die has been cast for a "new" housing consumer for the next several years … perhaps even a decade of more … and that calls for a new product strategy for the housing industry. This new strategy will call for new product criteria meeting these new conditions, much as we are seeing the auto industry re-invent itself in one model cycle. [see page 3]