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Analyst: Homebuilders to Become More Active in Hard-Hit Markets

Homebuilders who were crowded out of hard-hit states during the crash may soon make a triumphant return, one economist says in a recent analysis.

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Ever since home prices bottomed out in 2012, increases in Nevada, Arizona, California, and Florida have outpaced the country, with the latest quarterly data from the ""Federal Housing Finance Agency"":http://www.fhfa.gov/ (FHFA) showing gains up to 25 percent in these markets.

At the same time, however, homebuilding activity has remained ""very subdued.""

""Relative to long-run norms, Nevada, Arizona and Florida have among the lowest rates of building permits per capita in the country,"" said Paul Diggle, property economist for macroeconomics research firm ""Capital Economics"":https://www.capitaleconomics.com/.

So why is homebuilding so slow in these particular states?

""We think that low homebuilding volumes in these States are a legacy of the glut of existing housing sold cheaply during the worst point of the crash,"" Diggle said, noting that all four states ""suffered among the largest drops in house prices, among the highest rates of negative equity and among the largest foreclosure inventories.""

With cheap housing available, builders selling pricier new homes saw ""unprecedented drop in demand,"" he went on to explain.

However, with current housing demand ranking above average in all four states and the backlog of distressed homes clearing out faster, Capital Economics expects to see groundbreaking on more sites, and soon.

""An increase in homebuilding in these four markets is another reason to expect national homebuilding volumes to rise strongly in 2014,"" Diggle concluded.

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