By Mike Bodeen · 1 February 2021
New Construction Report
Usually, our Market Snapshot deals with the residential sales market in the Phoenix Metro communities solely, but todays subject combines commercial and residential real estate as they continue to tell the growth story of our market.
First, the residential. The 2020 new home market now has an accurate take on the number of building permits taken out this past year. In Maricopa and Pinal counties, 31,475 new home permits were taken out, compared with 24,673 in 2019 – a 28% increase! There is an expectation of higher numbers in 2021.
“…31,475 new home permits were taken out (in 2020), compared with 24,673 in 2019 – a 28% increase!”
These numbers however, don’t compare to the years of 1998 through 2006, when no year had less than 33,000 permits issued. The record year was 2004, when we saw an incredible 56,000 new home permits issued – the peak of the housing boom! And then building permits collapsed in 2008 following the overbuilding and causing many builders to leave the industry nationwide, but acutely in Arizona.
The market has changed since then. Builders have learned lessons and lenders are actually qualifying new home buyers to make sure the disastrous repeat of the 2000’s doesn’t happen again. Most buyers (74%) are buying to live in the home, rather than on speculation.
New home construction is hugely important with the substantial dearth of resale homes currently for sale. The major problem with new home construction is that it’s not happening fast enough. The next major problem is that resale and new home pricing are and will continue to increase. The rising cost of materials, plus higher land acquisition cost, the competition for labor increasing those costs, and greater buyer demand are a perfect storm to see substantial increases this next year. Which is why some builders are no longer locking their prices from the date of contract.
So now we look at the Phoenix Metro commercial market. According to the CBRE Inc.’s first U.S. Development Opportunity Index, the Phoenix market has ranked as one of the nation’s most ideal for commercial construction. It ranked 2nd for both office and multi-family development, and 3rd place for industrial. Clearly, some pretty smart people continue to view the Phoenix metro market as a strong growth market. Of interest is that this index is looking at these markets based on the current Covid 19 pandemic.
Allyson Calvert, a senior project management director for CBRE said that “Phoenix has advantages even through tougher times. It’s very easy to build here, and we have lower costs and available land for development.” Calvert added about industrial, “…it continues to be strong,” saying that the growth of Phoenix and the increased demand for industrial space continues to drive the need for new supply. See full article Here.