Single-family homebuilder permits were down 19% so far this year, the latest numbers from the Home Builders Association of Central Arizona.

Between January and November, municipalities across metro Phoenix issued 23,480 permits, down from 28,983 permits during the same period last year.

The new year will bring reduced profit margins for homebuilders, said Thomas Brophy, research director for Colliers International.

But homebuilders who have branched out to the build-to-rent sector will have a captivated audience of investors, he said.

Homebuilders likely will need to lower prices and offer incentives to spur buyer demand, said Steven Hensley, advisory manager for Zonda housing market research firm.

"This will impact their margins for each home sold," he said. "However, builders have maintained healthy margins over the last two years and likely have some room to absorb the lower prices."

Danny Court, principal and senior economist with Elliott D. Pollack & Co. in Scottsdale, said homebuilders have felt a bit of relief in vertical construction costs, but not in horizontal construction costs yet, which limits a builder's ability to lower prices.

"We are seeing more interest rate buy-downs to help motivate potential buyers," he said.

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By Angela Gonzales - Senior Reporter, Phoenix Business Journal