By Mike Sunnucks | Rose Law Group Reporter
Home builders and other residential real estate developers continue to see upward cost pressures as new developments sprout and more new homes get built in Maricopa and Pinal counties.
Jim Belfiore, president of Belfiore Real Estate Consulting in Phoenix, said “horizontal” costs related to putting in concrete foundations, infrastructure and utility hooks up have gone up along with landscaping and labor costs. Horizontal costs can also include broader infrastructure at new developments such as roads.
“Generally, all costs have been increasing,” Belfiore said. “There is a lot under construction.”
Andy Warren, president of Scottsdale-based Maracay Homes, is also seeing higher horizontal costs.
“Site development costs have increased substantially over the past 18 months,” said Warren who has residential developments in Gilbert, Chandler, Peoria, Buckeye and Mesa.
Greg Vogel, CEO of Scottsdale-based Land Advisors Organization, said concrete costs and cities revising and upgrading development requirements for asphalt, piping and wider streets are driving the horizontal costs increases.
“The cost to put a lot in the ground is up about 30 percent from 30 months ago. So, it’s been rising out 1 percent per month and that is disruptive.”
Vogel said.
He said even minor changes by cities such as wider streets translate into higher building and development costs.
“Going from 48 to 50 feet, it sounds like a not a lot but when you multiply two feet by miles and miles and miles of payment it’s a lot,” Vogel said.
There are also some other wild cards related to builder costs and the overall economy.
“We’ve seen the costs of lumber go down dramatically,” Belfiore said.
Lumber prices previously shot up, including last year, with high construction demand and U.S. tariffs on Canadian imports.
But now lumber demand and prices are down. And that has economists watching to see if there is greater trendline nationally.
U.S. President Donald Trump’s trade war with China is impacting consumers, farmers, retailers and other industries. Trump’s looming tariffs on Mexican imports are also rattling cages from border states to manufacturers.
The China tariffs have been having a big impact on real estate, according to Belfiore.
“I’m not hearing about any impact as it relates to the builders,” said Belfiore.
