New homes are being built in the Phoenix area at the fastest pace in 10 years, and prices are climbing faster than they have in five years.
All signs indicate that the Phoenix metro homebuilding market is in recovery.
More than 1,950 new homes were sold valley wide in May, and the pace of sales for the year is 18 percent ahead of last year as reported by Belfore Real Estate Consulting and R.L. Brown's Phoenix Housing Market Letter reports that May was the best month for new home sales since March, 2008.
Brown also reports that the median new home price is up almost 3 percent from last year to $330,000. That's about $70,000 more than the median price of existing home sales.
Forecasts call for homebuilding to steadily climb valley wide to more than 26,000 annually by 2020.
However,, homebuilders and analysts see a few big obstacles in the way of this recovery: rising labor, land and construction material costs. All three will add to the cost of a new Valley home.
Source: Arizona Republic.
Starting with the basic ARMLS numbers for June 1, 2018 and comparing them with June 1, 2017 for all areas & types:
- Active Listings: 16,018 versus 12,129 last year - down 13.3% - and down 1.9% from 16,329 last month
- Under Contract Listings: 11,399 versus 12,129 last year - down 6.0% - and down 8.8% from 12,504 last year
- Monthly Sales: 10,081 versus 9,858 last year - up 2.3% - and up 9.8% from 9,178 last month
- Monthly Average Sales Price per Sq. Ft: $164.03 versus $150.51 last year - up 9.0% - and up 0.7% from $162.81 last month
- Monthly Median Sales Price: $262,900 versus $240,000 last year - up 9.5% - and up 3.9% from $253,00 last month
May was a weaker month for new listings , down about 1% compared to last year. This was a contrast to April which had seen a stronger rate than 2017. We normally see total supply drop between and June and we still expect this downward trend to continue until September.
The sales count for May was very strong, topping 10,000 for the first time since 2011. However, the number of listings under contract at the beginning of June is much lower than last year - down 6%. Even with this possible sign of wavering demand, supply is so weak that sellers still have advantage in negotiations. This situation inevitably leads to price increases and the annual rate of change has reached 9% for average $/SF and 9.5% for median sales price.
The rise in interest rates does not tend to lower demand, in the current circumstances it can lower supply too. Home owners with an existing mortgage will be less inclined to move if their next mortgage is going to be at a much higher rate than their existing one. This is more likely to be the case with every passing month. As a result, we do not see prices as likely to fall because of interest rates, but we do anticipate limited growth in sales volume.
Source: The Cromford Report by Michael Orr
Recent report from Think Realty suggests that home prices are likely to surge in areas of the South and Southwest.
Census data, for certain cities in the South and Southwest will likely see surging home prices to accompany surging population numbers. The nations fastest growing cities are mostly far from the pricey tech hubs and the skyscrapers on the East Coast.
Phoenix is rated as the second fastest growing city, and Maricopa County (includes Phoenix) is the fastest growing county in the US.
Comparing the first quarter 2018 to 2017, there were 16,227 sales in 2018, which was 4% higher than the 16,602 sales in 2017. The median sale price in first quarter 2018 was $277,000 a 5% increase compared to $255,000 in 2017.
There is a lot of news positively affects the Maricopa County real estate market. Population, job and wage growth should continue to increase. These increases will keep the competition among buyers of single family homes fierce.
MLS Sales Over $1M up 36%
Inventory Under $150K Down 62%
Buyers continue to have a tough time finding inventory on the low end of the market. New listings overall are down 9% year-to-date thus far, which doesn’t help matters. Compared to February last year, inventory under $150K is down 62% and down 43% between $150K and $200K. Mid-priced inventory between $200K and $500K is down 11% and down 7% between $500K and $1M. Only inventory over $1M is up nearly 2% over last year. Seller concessions are also down so far this year. After hovering around 27% for the past 2.5 years, closings with seller concessions dropped down to 23% as the seller market has strengthened in the new year. Homes sold between $150K and $200K had the highest percentage of seller concessions at 34%.
Buyer season is ramping up as expected during this time of year. So far listings under contract are nearly dead even with 2017 levels at this time and are expected to continue rising through May. 2018 year-to-date sales are within 2% of the first 6 weeks of last year. Not surprisingly, MLS sales under $200K are down 21% due to low inventory. However, sales between $200K and $300K are up 14%, $300K and $500K are up 21%, $500K and $1M are up 20% and sales over $1M are up 36%.
Commentary written by Tina Tamboer, Senior Real Estate Analyst with The Cromford Report ©2018 Cromford Associates LLC and Tamboer Consulting LLC
The population of Phoenix has grown to more than 1.6 million people. We have a diverse economy built on the foundation of tourism, manufacturing, tech, financial, healthcare and educational institutions. Phoenix is part of Maricopa County which was recently named as the nations fastest growing county, adding residents, jobs and wages at a higher rate than any other county in the country. The labor market is also young and diverse, with an average age of 34.
Over the last 12 months, Phoenix Metro has seen a 2.8 percent job growth, up from a 1.5 percent gain in 2016. This growth has been driven by an increasing number of advanced industries moving to and investing in our city. There is also an increased amount of competition which has resulted in wages increasing by 7.6 percent in 2017 alone.
Forbes recently ranked Arizona as the fourth best state for future job growth with much of the job growth has been focused in healthcare and high tech industries. ZipRecruiter reported Phoenix Metro to be the fastest growing tech town in America, as well as the second best for healthcare jobs.
Experts predict that in the short term, there will be an increase of job seekers relocating to Arizona to help fill the high demand, especially from areas with a high cost cost of living or colder climates. The "climate" is great for the young professional who wants to settle down, buy a home and begin the next phase of their life or for that matter the more mature who are looking for a better, more affordable life style.
Realtor.Com has ranked the Phoenix metro area as the number one market in the country with a rise in our median price to $300,000 representing a median price rise this year of 5.94% and a sales growth of 7.24%.
Maricopa County showed a daily population increase of 222.(Approx. 81,000)
Phoenix is now the 5th largest city in the U.S.
There has been an increase of 165 new jobs daily.
WalletHub.com ranked Scottsdale as the number one best city for jobs.
As of the end of September 2017 a normal seasonal pattern is in place. Buyer demand continues to be strong in all price areas, with inventory up slightly and sales dropping off slightly.
Valley wide there were 6,179 closings in the Valley. With 15,057 homes currently active, this represents a 2 1/2 month supply of homes for the entire valley.
We continue to be a strong sellers market.
The Greater Phoenix housing market continues strong and healthy and continues to strongly favor sellers over buyers. In fact, 2017 is shaping up to be one of the best years for home sales in Metro Phoenix.
At the low end of the price market, the number of homes continue to decline. Below $175,000 there are just over 1,000 homes offered for sale. By comparison, in2011 there were 11,000 homes available for sale. Once sale prices reach the $200,000-$250,000 price range there are more listings than two years ago, however, the sales rate has increased 41% over the last two years thus, the days of measure has declined despite the higher active listing count.
The mid price range of $250,000-$500,000 is slightly different. The number of active listings is 8% higher than two years ago. However, the annual sales rate has increased 46%, so the extra supply is completely overwhelmed by the increase in demand.
The price range in excess of $500,00 shows mixed results. There is more than a 12% increase in supply than Two years ago. However, the annual sales rate for homes over $500,000 has shown an increase of 37%. The growth in demand is much faster than the growth in supply. Prices in most luxury areas are starting to rise again, particularly for homes under $1,500,000. Homes priced in excess of $1,500,000 has shown sales increased by 11%, while supply has risen by 29% thus creating the only problematic section of the Phoenix Metro market.
May 2017 inventory levels have stabilized, with May closings in most areas the highest since 2011.
Valley wide May closings were 8,138. With 15,584 homes currently active, this represents just under a 2 month supply of homes. Considering that in May 2011, sales represented mostly bank owned and short sale properties at deeply discounted prices, the current situation represents a more stable market with an upward trend in pricing.
The most robust markets continue to be the West Valley, the SE Valley and Phoenix which all dropped to 1 1/2 months of supply. Obviously, this will continue to put upward pressure on pricing in these price ranges.
Scottsdale under $1M has dropped to a 2 1/2 month supply. This is extremely low, considering that the average sale price was $535,666. In all probability, this will put upward pressure on pricing in the months to come.
In the luxury markets of Paradise Valley, inventory dropped to a 6 1/4 month inventory of homes. In contrast, the inventory in Scottsdale of homes in excess of $1M is at 11 1/2 months which represents a drop of 16%.
This data is for single family detached homes only. Supply numbers are based on the number of closings in the previous month divided into the total number of active listings.
The following data is from the Phoenix Business Journal.
According to data from the Arizona Department of Administration, The Valley's jobless rate in April is at 3.9% down from 4.1% in March and 4.5% a year ago.
With the national unemployment rate at 4.4%, who is hiring in greater Phoenix?
Construction firms added 2,000 jobs last month. Manufacturers added 500 jobs and finance and insurance 800 jobs.
Construction has hired 5,000 new workers in the past 12 months. Banks and insurance companies have brought on 7,800 new hires.
Bars, restaurants and hotels added 900 workers last month and 13,500 the past year.
The job losers last month were professional and technical service which shed 1,600 jobs in the Phoenix market in April.
Yes, current prices are the highest they have been since January 2008, and they are comparable to prices in April 2005.
However, in the period from 2005 to 2008 appreciation rates from 5% to an impossible and unsustainable increase rate of 45%. Compare that rate to the current sustainable annual appreciation rate of 5%.
From May 2016 to May 2017 Active listings have decreased 12.5% as the monthly median price has increased 5.2%.
Based on the current rate of home sales there is approximately a 2.7 month of inventory available. Simply put, if no new listings came to the market and based on our current rate of home sales, we would run out in 2.7 months.
Bottom line, existing home sales are strong, values are still there, home sellers are pricing their homes fairly and I fully expect home appreciation to continue at a 3-5 % rate for the foreseeable future.
Feel free to contact me with any questions you may have.