Plan to Wait for New Construction Homes, Where and Why.
Residential new build homes are not exactly flying off the shelf lately. It’s not because people aren’t buying brand new homes, quite the opposite. As a matter of fact, Phoenix AZ alone forecasts nearly 30,000 new home permits by the end of 2017. That doesn’t even take into consideration, rapidly expanding Phoenix Valley suburbs like Gilbert, East Mesa and South Chandler.
Most of the new-home builders I’ve spoken with in the Phoenix area have cited a shortage of skilled employees and insufficient availability of sub-contractors as the reasons for the months-long back-up in new home construction. Some of these delays here in Arizona are even as much as 8 months to a year.
Another major road block for home builders of large master-planned communities in Casa Grande and other areas South of the Phoenix Valley, has been water, or more accurately lack of water. In a recent post on AZ Central, the Arizona Department of Water Resources has notified developers of 15 proposed projects in Pinal County, that though not currently a dire situation, in the long term water may be in short supply. The AZCentral article further explains that under state law, developers can only build subdivisions in areas with historically significant use of groundwater, if they can prove they have a 100-year assured water supply. However, If I remember correctly from a Real Estate class that I attended several years ago, new home builders and developers can all cite the SAME 100-year supply source… doesn’t it make you wonder how that’s gonna work out?
Currently Arizona does an admirable job of water management. Energy and water conservation is alos on the minds of many of today’s homeowners. So I guess we’ll just have to wait and see where the shoe’s gonna drop for Arizona’s home builders.
Where Home-Building Is Booming, and Why
By Suzanne De Vita
Home-building is floundering against soaring demand, with inventory now at its lowest in two decades. Are any markets keeping up?
New construction is taking off in at least three, where each are expected to gain 40,000 new homes this year, according to a recent study by Trulia. Activity is exploding in Dallas and Houston, Texas, and New York, N.Y., the study found, with Dallas adding 48,772 homes to its stock, Houston growing by 47,946, and New York expanding by 40,006.
Researchers analyzed building permit data from the U.S. Census Bureau from 1980 to 2016, and the first half of 2017—which offer a basis to estimate ground-breaking—to project how many new homes will be built across the largest 100 metropolitan areas this year, and which metro areas are constructing more than their historical average. The markets set to have the most permits after Dallas, Houston and New York? Austin, Texas (29,872) and Phoenix, Ariz. (29,280). Austin, markedly, is also outdoing its norm, with 107.7 percent more permits, followed by Charleston, S.C. (72.8 percent more) and Nashville, Tenn. (65.8 percent more).
How are Dallas, Houston and New York coming out ahead when the rest of the country is playing catch-up? Sheer size, for one, but also growth in employment, income and home prices, the study reveals. Home-building is connected to jobs for the simple fact that more jobs provide more residents income, which stokes demand for homes in the market. In fact, in the 100 metro areas assessed, every one percentage point climb in jobs (per data from 2010 to 2016) parallels an average 5 percent rise in permits.
The link between building and income is comparable: a one percentage point increase in the median household income (also using data from 2010 to 2016) leads to a 2.1 percent upswing in permits, on average, the study shows. More pay, the researchers say, ups the ability to purchase a costlier home—and new homes, without question, tend to be higher-priced.
The relationship between building and home prices is also a factor: a one percentage point step-up in home prices results in an average 1.2 percent tick up in permits—but with a significant distinction. Price growth upwards of 24 percent moves the needle in the opposite direction, possibly because at that point, builders begin shouldering higher land costs and incomes start to lag behind prices, researchers speculate.
View the complete study, including the full list of markets with high home-building projections.
For more information, please visit www.trulia.com. Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. Reprinted with permission from RISMedia. ©2017. All rights reserved.
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Bill Salvatore / Arizona Elite Properties
Residential Sales, Marketing, and Property Management
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