Belfiore: Competing interests, low lot supplies causing spikes in home prices

By Mike Sunnucks | Rose Law Group Reporter

Real estate expert Jim Belfiore has projected home prices will rise between 7% and 9% this year.

Belfiore, a principal with real estate research firm Zonda, said the price jumps could potentially be even more dramatic with current lot and new home supplies very low and increased competition for land from home builders and for-rent subdivision developers.

The supply of speculative new homes in the Phoenix region hit a 91-low in November.

“Lot supplies continue to shrink,” Belfiore said of the region-wide supply challenges.

That is coupled with interest in available parcels for new home builders as well as those wanting to develop popular for-rent subdivisions.

“Those factors are pushing up land prices,” Belfiore said.

And that is and will translate into higher home prices.

Belfiore points to some new homes in the Queen Creek / San Tan area that saw a 5% price increase in just one month.

He said those types of price increases are poised to price entry-level, first-time and other home buyers out of the market.

“That is crazy and its unsustainable. It is scary,” Belfiore said.

Demand for land, limited lot and new home supplies could blow Belfiore’s 7% to 9% price increase projections out the water.

The concerns is that rises in home prices will result in a corresponding pullback in demand from priced-out buyers.

“At some point, enough of the market is priced out and/or buyers are getting nervous and pull back and demand falls,” Belfiore said.

The median price for a new home in the Phoenix market stands at $365,531 up from $328,474 a year ago, according to Belfiore and Zonda.

The median resale price is $331,000 up from $285,000 a year ago.

First-time and entry-level home buyers drove strong and sometimes unexpected demand in housing regionally during 2020 and the COVID-19 pandemic.

While dwindled lot supplies and new home inventories along with competition for land are driving up prices, Belfiore points out that Arizona and the Phoenix region’s continued population growth will maintain some demand for housing.

“The reality is we are still adding 100,000 people per year. People are still moving here and it’s still cheaper than California and Seattle,” he said.

The challenge for the housing market will be whether low supplies and continued demand will price too many prospective buyers out of the market this year.

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February 2021