New Homes for Sale in Greater Phoenix are in Robust Demand And What that Means for Land InvestorsOctober 08, 2018 / Blog / 0 Comments
“New houses are going up in the Phoenix area at the fastest pace in 10 years, and prices are climbing faster than they have in five years.”
So reports one article among many from the Arizona Republic in July. A simple Google search on “Phoenix area new homes sales” will provide pages of similar articles from a variety of sources making the same point: The housing market in Phoenix is hot!
Our building pace as of the summer was approximately 18% ahead of last year, trending toward some 23,000-24,000 new homes in 2018. Analysts are predicting continued increases in 2019 and 2020.
Land Development Means Investment Opportunity
That development is generating heated demand for developable land in the path of that growth and, consequently, driving up its value. When the ring of development expands out and touches large undeveloped parcels (frequently farmland), their values jump dramatically.
Developers compete against one another for the opportunity to turn 100-acre parcels into 350 to 400 home subdivisions. That competition takes place just beyond the visible development areas. The quiet, undeveloped areas 2-5 miles beyond the last subdivision are typically those with the most speculative activity for land acquisition.
The natural question for the land investor is, “Are we overheating? Are we about to overbuild this market?”
Phoenix Area Growth Looks Strong Going Forward
While I think we will inevitably overbuild our market again at some point in the future, I don’t think we are approaching overbuilding now.
- Build numbers.
We are currently building approximately 23,000 homes per year. That number is projected to climb into the 26,000 range by 2020. That’s from a low of about 10,000 homes per year in 2009-11 following the market crash. But we peaked just shy of 60,000 per year prior to that crash. We are far from our peak building activity. Our market demand exceeds the number of houses we are building, which is why prices are continuing to rise.
- Rental demand.
Even the radical numbers on apartment construction aren’t meeting demand. Rents have continued to rise. We are building about 10,000 units this year increasing our apartment inventory about 2%, which is about equal to our population growth rate. It appears the same supply and demand dynamics that are pushing rents up will continue to do so.
- Days on market.
Ultimately, we want to watch the balance of supply and demand for single-family homes. When demand softens, there are a host of metrics that are impacted. When a market has only 1 or 2 months of inventory as ours currently does, it indicates demand is outpacing supply. Days on Market (DOM) is the average time a home takes to sell. DOM decreases as a market heats up. DOM averages continue to be very low for the greater Phoenix area indicating a hot market.
- Migration to Arizona.
The prime mover for all measures of our market heat is population growth. The state is expected to grow by 1 million people by 2027, according to the Arizona Office of Economic Opportunity, and the vast majority of that growth will be in the Phoenix metro area. That’s a lot of new housing and development.
Arizona Land Partners is exploiting this dynamic market by purchasing strategic parcels directly in the path of this growth. We partner with investors, large and small, using a straightforward strategy for maximizing returns. Take a moment to review this website to understand our strategy, some of our past projects and current holdings, and how we split profits with investor-partners. Then drop us a line!