The metro Phoenix area is in the midst of a housing boom not seen since the early 2000s that is resulting in an undersupplied market at a time when more supply is needed to keep a balanced market. Insatiable demand for homes driven by low mortgage interest rates, the millennial cohort entering their prime home-buying years, and an influx of out-of-state residents is creating a severe housing shortage with no end in sight.
A runup in demand starting in May 2020 caused home builders to scramble for more land, and fast. Builders began to purchase all of the remnant finished lots in tertiary markets such as Casa Grande, Maricopa, Coolidge, Florence, and Buckeye that were developed in the early 2000s, and those lots are nearly all spoken for. The result: the lowest level of finished lots in the metro in over 15 years.
Speculative and existing inventory levels are also at the lowest levels in over 15 years. Limited resale stock, which is down nearly 50% compared with one year ago, has forced home shoppers to consider new homes. This has led to increased builder activity—so much so that builders could not build fast enough to cover all the demand. Home builders have 72% less inventory homes today than they held one year ago; they are carrying less than 700 inventory homes in the entire metro, which equals less than two units per active subdivision. This is unlikely to change in the short term.
The result of lack of land, excessive demand, and limited supply is a falling actively selling subdivision count, which is now at its lowest level in seven years. One hundred fewer new-home subdivisions are active in the metro Phoenix area than just one year ago. For over a year now, home builders have been selling out of subdivisions faster than they have been developing new homes. Simply put, there is not enough housing. Builders are at capacity from labor constraints and are increasingly limiting monthly sales activity to manage backlogs appropriately.
