Belfiore says more momentum this year over last
By Callan Smith | Rose Law Group Reporter
Homebuyers are back and inclined to purchase this year, says Jim Belfiore, president of Belfiore Real Estate Consulting. Buyers are diverse, from entry-level to those looking to purchase homes with upgraded features, he said at the Belfiore Phoenix Market Update on Thursday.
“With expected mortgage rate increases, including the rate increases that we’ve already seen, were going to see more of an urgency with buyers. Having homes ready to deliver is going to be really important as interest rates start to climb,” Belfiore said.
Traffic levels, which are pre-indicators for home sales, are up in nearly all Phoenix area regions, showing that buyers are shopping more, which has been translating into sales numbers. Belfiore said he expects sales to peak higher in 2017 at 3.3 to 3.5 subdivision sales per month, which would be up from 2016 numbers of 2.9 sales per month, with 549 active subdivisions in the Phoenix Market.
“There is a lot of momentum going into this year over prior years,” Belfiore said, after noting subdivision sales reached a 10-year-high not seen since 2007 in the last three months of 2016 and the period between December 16, 2016 to January, 15 2017.
“We are growing and might be struggling in a community here or there, but we’ve had more home sales than we’ve had in at least the past ten years,” Belfiore said.
The 12-month average sales rate is such that if the market continues at the same rate, 294 communities could sell out in the next 12 months.
Belfiore listed the top-selling subdivisions as Villagio by D.R. Horton, Canyon at Olive Park by Garrett-Walker, Crystal Vista by LGI Homes, Villages at Coldwater Ranch by CalAtlantic Homes, Express at Tartesso by D.R Horton, Primrose Estates at Vistancia by CalAtlantic Homes, and Reserve at Queen Creek Station by Fulton Homes.
The top builders, which Belfiore compiles by highest sales volume on average, are LGI Homes, Fulton Homes, William Lyon Homes, KB Homes, Mattamy Homes and D.R Horton.
One suggestion Belfiore made to builders in the audience was to find markets with small numbers of existing resale homes, where they can compete and get building immediately. He gave the example of Avondale, which is short on lots and has high sales volume.
Permit numbers for 2016 are looking to come in between 18,000 to 18,400, which is up from 2015 numbers at 16,940, and Belfiore projected permit numbers for 2017 at 21,200. Factors affecting potential permit numbers include yet unanswered questions, such as if builders will have enough lots and what impact rising mortgage rates will have.
Of available lots, there are only 48,000, which is down two percent over last quarter, with most of those lots in inactive subdivisions in Maricopa, Casa Grande, Florence, Coolidge, South Buckeye, and the Sun valley Parkway. Builders moving to those areas are expected to take advantage of availability.
A big issue plaguing homebuilders has been the lack of appreciation in new home prices, which Belfiore expects to change in 2017 and is projecting a seven to nine percent appreciation increase.
Regarding employment, “We are reaching a full-employment scenario with unemployment under five percent, creating a situation where there aren’t enough people in the workforce to fill jobs, which is happening in Phoenix,” Belfiore said. We’ve stumbled in terms of employment growth, which is something we’re monitoring closely.”
David Kitnick, founder and president of Rosewood Homes, said people need to continue to recover from the loss of homes and savings and start to build up savings, which is a slow difficult process.
“I don’t see the government making changes,” Kitnick said. “I’m not saying that they should try to prop up things more because we saw what happened the last time banks got aggressive with easy lending,”