Belfiore: The supply challenge

By Mike Sunnucks | Rose Law Group Reporter

Real estate expert Jim Belfiore says demand for new homes continues to show resiliency in the Arizona market despite the unprecedented impacts of COVID-19. It is the supply side of the housing market that presents the challenge, according to Belfiore. 

“Today, supply is too low,” said Belfiore, who is president of Belfiore Real Estate Consulting in Phoenix. Belfiore said during a virtual forum this week on the Phoenix and Tucson housing markets that demand for new homes has been surprisingly strong coming out of Arizona’s COVID-19 shutdown from mid-March to mid-May. Demand has been spurred by record low mortgage interest rates. 

But Belfiore is concerned about low supplies of existing and new homes for sale in the Phoenix region. He said existing homes for sale in metro Phoenix are down 28 percent compared to a year ago with 13,451 listings for a region with a population of 4.7 million people. 

The supply of existing homes for sale is down 40 percent from last year in Tucson.  Some of the drop in existing homes stems from COVID-19 homeowners and buyers being reticent to go into others’ residences or conversely host open houses. 

Those dynamics help steer more buyers to new homes. But the pipeline of new homes is also not keeping up the demand, Belfiore said. He said the speculative supply of new homes in metro Phoenix is down 23 percent from last year.

“The challenge is going to be supply and keeping prices palatable,” Belfiore said. Demand spurred by low mortgage interest rates and expected continued population growth in Arizona will put upward pressures on prices. “Pricing is going to become challenging at all levels,” Belfiore said. 

That may be good for builders and sellers, but it runs the risk of affordability challenges and pricing first-time and entry level home buyers out of the market. Those segments have been driving demand and new home sales.

Belfiore said existing home sales in the Phoenix market are up 13 percent compared to last year according to the Cromford Report Data. He expects new home prices to increase between 5 percent and 6 percent this year. 

Belfiore also expects 27,400 permits for new home construction in the Phoenix market in 2020 That will up be up from 24,937 permits in 2019 and despite all the COVID impacts.

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