By Callan Smith | Rose Law Group Reporter
The speed of new home sales has improved markedly over the past two years, Jim Belfiore, president of Belfiore Real Estate Consulting, told a group of 800 plus industry insiders at the 9th Annual AZ Dealmakers event Thursday.
New home sales per subdivision last year were at an average of 2.7 sales per month in Metro Phoenix. The area had decade highs in traffic and home sales activity, with eight consecutive months of 1,500 new home sale contracts out of 555 active new home communities. Ten or fewer lots remain in 156 of those communities.
A key indicator of housing growth said Belfiore is the number of new home sales per subdivision.
“That’s important because builders underwriting projects are looking at two things, how fast they can sell homes and at what price.”
Smaller, less sophisticated builders and struggling infill communities are seeing fewer sales in the Valley because, in part, of over pricing and late construction starts.
Big builders are doing better with nationally traded builders and larger regional builders selling at a rate of four to seven homes a month. Builders such as D.R. Horton are selling seven or more a month per active community. There were about 18,000 new home sales contracts in 2017. Belfiore said he expects that number to continue to climb.
Buyer demographics include both move-up buyers and millennials entering the market. Baby boomers also provide an opportunity for home builders.
Rising home prices are driving entry-level and value buyers to areas such as south Buckeye, Goodyear, Queen Creek, San Tan Valley, Coolidge and Florence.
Of concern is affordable housing, Belfiore said.
“Rental prices have skyrocketed over the past four years, some will moderate in places with concessions seeping into the market where supply has been overbuilt, but we’re talking ninety percent of the new apartment product built today is renting at nine hundred to seventeen-hundred dollars, even twenty-five hundred dollars per month in downtown Phoenix.”
“The area where we’re lacking is the truly affordable product,” he said.
Fillmore West, in West Phoenix’s new infill community with about forty homes, sold quickly. The homes do not have all the amenities, but do have a great curb appeal, Belfiore said.
Regarding permits, in 2010 and 2011, the industry fell to a forty-two-year low, dropping from 45,000 to 60,000 permits per year. The number of permits for 2017 are expected to come in at 20,500, based on U.S. Census figures thru November and Belfiore’ s December projection.
Belfiore said he expects the number to climb to 26,000, with a possible drops in 2021 and 2022 because of projected unfillable positions in the job market. There is a shortage of people to fill jobs at 4.5 percent unemployment.
Tucson home builders have seen improvement, but the region lags Phoenix by 18 to 24 months. Job creation in Tucson should bring growth to the market. Belfiore suggested Tucson builders hold off on bringing new product to market until sales activity grows.
The top-selling new home communities in Northern Arizona are in Prescott and Prescott Valley, with two dominant builders Mandalay Homes and Dorn Homes. Universal homes, offering an entry-level product, is doing well in Prescott Valley. Chino Valley is on the cusp of growth because buyers are looking in outlying areas. Jobs and retirement are attracting homebuyers
For the rest of Northern Arizona, new home sales in Flagstaff are slower. Markets such as Payson have been sluggish, Show Low and Pinetop resale markets are stagnant.
Cottonwood and Clarkdale are doing well, and Sedona had its first new home community open in recent years.