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 percent for the year with the largest decline (23 percent) expected in Pinal County. The Northeast Valley continues to see the strongest starts growth year-over-year with an increase of 37.4 percent (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 percent 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 percent. Though sales have been down 13.86 percent from June 2014, we are still way below a normal resale market of five to six 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. This is down 14.8 percent from one year ago, but it still represents a large volume of transactions. 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. Buyers have the opportunity to shop around though there is less listings the urgency to buy can also been felt in the resale market. Though median pricing at this point has only seen slight depreciation we will probably see larger numbers before the end of the year.

“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 depreciation 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), or finished lots, 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 percent 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 moderate slight growth of 10 to 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 being purchasing until 2017 now is the time for builders to plan and strategize. As we wait for the year to close out, expect to see more incentives but very little changes in base pricing.”

Contributed by Metrostudy.