The housing market in Arizona is gangbusters right now, but how long can the record breaking sales go on?
Real estate consultant Jim Belfiore said the surge could stick around into next year.
The Valley has not seen such high activity in home closures for 15 years.
In August 2015, the Phoenix metro area had 91% fewer buyers than July, Mr. Belfiore said at a recent virtual forum hosted by Rose Law Group.
“I think we are going to have the best spring selling season that we have had since 2005,” he said. “We may be in the fourth inning in terms of the housing demand.”
But inventory is extremely low and most people in the market to buy don’t have homes to sell.
“A lot of them are Millennials. They are in the market finally and at that point in their life stage where they are buying homes. And then you have a percentage of the market that are investors and they don’t have homes to sell either, so about 50% of buyers in the Phoenix metro area don’t have homes to sell,” he said. “You have surging demand and it all funnels into a pricing situation that’s not pleasant if you are a buyer.”
New buyers will have great mortgage rates at 2.5-3% for conventional loans but because of the low inventory, Mr. Belfiore said home buyers should act quickly.
“If you are a home buyer, if you have been considering buying a home, absolutely do it as soon as possible because home prices are jumping at a percentage rate of more than 1% on a monthly basis and we are going to continue to see that into the future because there is no supply.”
The luxury home market is no different, with $1 million contracts up an amazing 93%, compared with this time last year.
Rod Cullum, president of luxury home builder Scottsdale-based Cullum Homes, said the last two years have been the best in gross sales for him in 35 years.
He said at the forum the pandemic is changing how luxury homes are designed and built — getting a little larger because people are adding another office in the house, with working from home more common.
Luxury homes were often under 3,000 square feet, now buyers are requesting closer to the 3,000-4,000 square foot range, he said.
Luxury lock-and-leave homes that were once all the rage are not any more, he said.
“We now talk about what does the Zoom wall look like behind you? They want multiple Zoom walls. His and her Zoom walls. They need a Zoom wall if they are asking for a raise or if they are closing a deal. Some want to show the golf course or mountains in the background,” Mr. Cullum said. “Clients are wanting more locations within the house to interact with employees in different parts of the world and with clients from around the world. It has been a very interesting conversation.”
One negative effect of the pandemic on the housing industry has been the increase in lumber costs due to closed mills.
Mr. Cullum said there has been an almost 100% increase in lumber costs, which has put pressure on starter homes.
A 4,000 square foot home generally required around $40,000 in lumber costs, now it is in the range of $70,00-$80,000, he said.
“I’ve been through this three or four times in my career. Hopefully we will start to see a softening. Some are predicting end of first quarter for a more normal level,” Mr. Cullum said. “And right behind lumber, we are seeing a surge in labor costs. The labor situation is tough. There are just not enough skilled people to build homes.”
Philip Haldiman can be reached at 623-876-3697, email@example.com, or on Twitter @philiphaldiman.