Prospective home buyers may have to turn to new houses instead of resales if they hope to find new digs any time soon, a leading Valley real estate analyst said last week.
With resale home inventory inventories at nearly historic lows, the Cromford Report said last week that buyers’ only recourse may be new construction.
“Buyers may be liking the interest rates, but the lack of available inventory is a nightmare for them,” it said. “No doubt many will turn to the new home market, which has seen surprisingly stable pricing under these circumstances.”
Calling the current state of the market “extraordinary,” the Cromford Report also said, “At some point this trend in favor of sellers has to change direction, but there is scant evidence of that at the moment.”
Ahwatukee Realtor Christie Ellis said buying new can have a big challenge since “oftentimes the close date is uncertain on a new build – with the labor shortage this can cause significant delays in finishing a property.”
While mortgage interest rates “are at historic lows again, they may not be at time of close,” Ellis said. Thus, “timing selling a home and possibly finding interim living, can be an issue.”
Ellis also noted, “there is a lot not included in a new build that is typically an out of pocket cost vs having it in the mortgage on a resale – like landscaping, pools, window treatments, etc.”
With supply at such a low level, some real estate experts say they are surprised that prices have remained relatively stable.
But they also suspect that won’t last much longer and that prices especially on existing homes will start to rise.
“What has become exceptionally clear over the last couple of months is that while prices haven’t reflected the continued imbalance in the market, we can most certainly expect they will in the short term,” said one Realtor.
As of the end of last week, about 17,500 homes were listed for sale in Maricopa County.
Even though this is a slow time for sales, that’s still about half the usual inventory of available resales, Realtors said.
In Ahwatukee as of last week, there were 188 listings that ranged from a 750-square-foot condo listed at $160,000 to an 11,000-square-foot home with a $4.1 million price tag. Of homes on the market in Ahwatukee, 25 carried seven-figure price tags.
Nevertheless, “resales are busy in Ahwatukee,” Ellis said, noting many houses on the market are getting multiple offers – and not staying on the market very long.
As for new homes in Ahwtaukee, the two major developments are being built by Blandford and Ashton Woods and Ellis said they “are so new to the area we will have to wait and see” how pricing turns out.
Promontory in far west Ahwatukee “is more a luxury new build at the end of the day because of the final price points,” she added.
Ellis said she can’t recall a time when inventory was so low.
“I recall the 2005-2007 buying frenzy but that was not so much an inventory issue as a sub-prime loan issue,” she said.
She also said that Cromford Report’s prediction of any major increase in prices is something “I can’t see.”
“Closer to an election year, rate adjustments, global market – yes, all those can cause disruptions.
“I think we took such a hard hit from 2008-2012 we may fair better than most markets in the country. I have heard that the shortage of inventory is going to get worse so that will certainly change the stability in the market,” Ellis said.
The apartment scene is not much different when it comes to affordable living quarters..
Marcus & Millchap issued its quarterly report on multifamily construction in the Valley and headlined it: “Apartment Construction Falls Short of Residential Demand; Average Effective Rent Skyrockets.”
Apartments are getting eaten up quickly as the result of huge economic expansion in the Valley and a massive influx of people moving from out of state, the real estate brokerage said.
“Corporate expansions continue to drive in-migration as companies and job seekers seek refuge from the high costs found in other major metros,” it said, noting major companies are creating jobs by the hundreds.
As a result, rents are soaring.
“The Phoenix apartment market has consistently been outmatched by rental demand over the past several years despite high levels of construction,” the brokerage said, adding that more than 8,200 new apartment units will have been added to the Valley for 2019.