Posted in Phoenix - Tucson Market | Posted on 11-19-2014 | Written by Metrostudy News
- Metrostudy’s 3Q14 survey of the Phoenix market shows starts down 10% for the year; closings are also trending down
- We continue to see the strongest growth in the Northeast Valley
- As affordability begins to fade and millennials content to wait it out it is expected that 2014 will be a lackluster year and one that some builders will be ready to forget.
November 2014: According to the Metrostudy 3Q14 survey, home starts, attached and detached, in the Phoenix area numbered 10,755 over the last four quarters. Starts saw a larger decrease for the quarter down 10% for the year with the largest decline (23%) expected in Pinal County. The Northeast Valley continues to see the strongest starts growth year over year with an increase of 37.4% (860 starts). Closings over the last four quarters are also trending down to 10,891; though we had hoped that closings would remain flat for the quarter we are now trending down 5.9% for the year.
MLS listings continue to remain flat for the year with 23,195 listings in September. We are seeing higher listings than 2013, up 13%. Though sales have been down 13.86% from June 2014, we are still way below a normal resale market of 5-6 months of supply. The market is currently holding 3.9 months of supply. Days on market have been holding steady at 84 days since the beginning of 2014. In September of 2013, the days on market were 61 days.
For the four quarters ending in 3Q14, single family annual MLS sales numbered 71,972 units, down 14.8% from one year ago. The median price of a single-family home sold through the MLS dropped slightly in September reaching $199,000, a 4.7 percent increase from twelve months ago. The average price per square foot is trending down as well at $125.83 as reported by the Cromford report. Just as we are seeing in the new home market, it is no longer a seller’s market.
“The story remains much the same in the SE Valley, which is outpacing other submarkets by leaps and bounds,” said Rachel Cantor, Director of Metrostudy’s Phoenix Region. “Nine of the top 25 master planned communities in the Phoenix market are located in the SE Valley which includes The Bridges, Morrison Ranch, Eastmark, and Adora Trails. Though the starts look good, most builders that are sitting in subdivisions such as Eastmark or The Bridges are not currently feeling the wonders of being in the top 25 communities. The competition is constantly changing as builders fight to meet their end of year numbers and move specs in these communities. Buyers are attracted to this market for a number of reasons and though builders may not be happy in these subdivisions now is the time to start thinking about replacement projects. Price pressure is expected through the end of the year and builders should start looking at 2015 and 2016 projects to ensure proper product placement and pricing.”
The overall inventory of vacant developed lots (VDL) continues to rise in Q314. The total of 54,309 vacant lots includes all product types, including attached product as well as custom lots. Though VDL inventory has seen minor growth year over year currently 5% from Q3 2013 it has been on an upward trend. Through most lots are in the outlying areas of Pinal County and the SW Valley, reviewing existing positions and timeline for lot deliveries is going to be critical in 2015. Planning lot deliveries and subdivision close-outs in highly competitive areas like the SE Valley will help builders begin to review purchases for lots in 2016 and 2017. As builders continue to struggle with sales across the valley we have expected to see more finished vacant inventory on the ground this quarter. We actually tracked only 1 percent growth Q3 over Q2. The number of newly built finished vacant units totals 2,550, which is up 20 percent from one year ago.
“As advised previously during the year, we advise builders to approach 2015 with caution,” said Cantor. “With mixed signals comings from buyers within the Phoenix market and no strong indicators for job growth or major mortgage changes it is time to prepare for only moderate growth of 10-15 percent until 2017. Though the lower down payment requirements will probably help some buyers with their purchase, I do not expect this to bring buyers out of the woodwork. With the increase in interest rates now being pushed until end of 2015 to early 2016 and millennials not expected to begin purchasing until 2017 micro awareness of your target buyer and segment is extremely important for builders over coming year. For now, as we wait for the year to close out, expect to see more incentives but very little changes in base pricing.”
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