Homebuilders in the Phoenix area started construction on close to 2,000 new homes in June, the best number since before the great recession. Mike Orr, founder of the Cromford Report, which provides information on the Greater Phoenix residential real estate market, will discuss the housing market along with Tina Tamboer, also of the Cromford Report.
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TED SIMONS: HOMEBUILDING IN THE VALLEY IS UP 15 PERCENT COMPARED TO LAST SUMMER, THOSE ARE SOME OF THE STRONGEST NUMBERS IN YEARS. HERE TO "CRUNCH" SOME OF THOSE NUMBERS IS MIKE ORR, FOUNDER OF THE CROMFORD REPORT, WHICH PROVIDES INFORMATION ON THE GREATER PHOENIX RESIDENTIAL REAL ESTATE MARKET. ALSO JOINING US FROM THE CROMFORD REPORT, TINA TAMBOER. GOOD TO HAVE YOU BOTH HERE, THANKS FOR JOINING US.
TINA TAMBOER: THANK YOU.
TED SIMONS: 15 PERCENT YEAR TO YEAR AND THIS IS IN JUNE. WHY?
MIKE ORR: THE WHOLE MARKET IS ACTUALLY EXPANDING. RESALE SALES ARE UP, TOO. BUT THE NEW HOME MARKET IS GOING UP THE MOST. WE HAVE THE INCREASING POPULATION, JOB GROWTH, DEMAND FOR HOUSING, OUTSTRIPPING THE SUPPLY AND I WOULD SAY PARTICULARLY AT THE LOWER END OF THE MARKET. THE MOST AFFORDABLE END. WE ARE STARTING TO SEE THE BUILDERS START TO ATTACK THAT LOWER END OF THE MARKET NOW ADMITTEDLY A LONG WAY OUT OF TOWN.
TED SIMONS: where are they being built for the most part?
TINA TAMBOER: A LOT OF THEM ARE BEING BUILT ON THE OUTSKIRTS OF TOWN ESPECIALLY THE HOTTEST ONES WHERE THE NEW CORPORATIONS HAVE BEEN MOVING IN. WE HAVE SEEN A LOT OF JOB GROWTH AT THE I 17 AND 101 INTERSECTION. SO THAT WHOLE AREA NORTHWEST PEORIA DOING A LOT OF NEW HOMEBUILDING AND UPPER PRICE POINTS AND ALSO WE ARE STARTING TO SEE SOME IN SOUTH PHOENIX.
TED SIMONS: I WAS THINKING CHANDLER.
TINA TAMBOER: YEAH, THE SOUTHEAST VALLEY HAS CORPORATIONS AND LARGE NUMBERS OF PEOPLE THEY ARE HIRING. SO WE SEE A LOT NEW CONSTRUCTION GOING ON UP THERE.
TED SIMONS: MOSTLY OUTER AREAS? WHAT ABOUT IN-FILL? I KEEP HEARING IN FILL IS HAPPENING--- IT LOOKS LIKE ITS HAPPENING.
TINA TAMBOER: YEAH, WHERE THEY CAN GET THE IN-FILL ARE USUALLY IN THE ARCADIA AREA IN SOUTH SCOTTSDALE AND WE ARE SEEING IT ON THE WEST SITE WHERE IF THEY CAN GET IT WEST SIDE THEY HAVE VERY LUCK OUT THERE.
MIKE ORR: THE VOLUME IS NOT THERE. IT TAKES LONGER TO GET THE LAND ACQUIRED AND USUALLY IT IS ONLY A SMALL PIECE SO YOU CAN ONLY PUT UP 12 HOMES NOT 250. THE BIG BUILDING IS GOING ON FURTHER OUT.
TED SIMONS: I WAS GOING TO SAY EVEN THESE NUMBERS ARE 15 PERCENT YEAR TO YEAR IS STRONG BUT OVERALL NUMBERS STILL PAIL TO PRE RECESSION?
MIKE ORR: YES, LESS THAN HALF OF THE 1990S. SO THEY ARE NOT OUTRAGEOUS NUMBERS. IN 2005 2006-- 2007 WE WERE PROBABLY DOING TWO TO THREE TIMES AS MANY HOMES EACH YEAR AS WE ARE DOING NOW.
TED SIMONS: SHORTAGE OF HOMES UNDER $350,000. IS THAT AN IMPACT ON THIS NEW HOME CONSTRUCTION?
TINA TAMBOER: ABSOLUTELY. BUT WHAT HAPPENS IS WHEN THEY FIND AN AREA THAT HAS LOW SUPPLY LIKE THAT THE NEW HOMES WILL ACTUALLY ADD TO THE SUPPLY SO EXISTING HOMEOWNERS IN THE AREA MAY NOT SEE THE SAME APPRECIATION RATES AS OTHERS THAT DON'T HAVE TO COMPETE WITH NEW HOME SALES. ON THE LOWER END, BECAUSE THEY ARE NOT COMPETING WITH NEWER HOMES WE ARE SEEING HIGHER APPRECIATION RATE OVERALL AND IS MORE SUSTAINABLE MODERATE RATE WHERE WE ARE SEEING THE HOMEBUILDING.
TED SIMONS: and a tighter spread between now and resale and i guess that would help the new market; would it not?
MIKE ORR: IT IS ALL A QUESTION OF MIX. WHAT WE WERE SEEING IS THAT NEW HOMES WERE ABOUT 25 30 PERCENT LARGER ON AVERAGE THAN THE RESALE START BECAUSE THE BUILDERS WERE BUILDING THE BIGGER HOMES TO MAKE MORE PROFIT. THEY ARE STARTING TO MOVE A LITTLE FURTHER DOWN THE MARKET IF YOU LIKE AND BUILDING SMALLER HOMES, MORE AFFORDABLE HOMES, THAT IS MAKING THE AVERAGE NEW HOME A LITTLE SMALLER SO THE PRICE IS COMING DOWN TO MEET THE REQUEST. IT IS GETTING CLOSE TO THE AVERAGE PRICE OF THE RESALE HOME.
TED SIMONS: SAME THING FOR CONDOS AND TOWNHOMES OR IS THAT A DIFFERENT BEAST ALL TOGETHER?
TINA TAMBOER: THE SHORTAGE IN INVENTORY, ESPECIALLY WITH $150 THOUSAND IS FORCING SOME PEOPLE TO START CONSIDERING TOWNHOMES AND CONDOS SO WE ARE SEEING THAT THEIR APPRECIATION RATES WHICH WERE FLAT FOR A WHILE HAVE STARTED TO GO UP ESPECIALLY IN AREAS AGAIN CENTRAL PHOENIX, THAT CENTRAL CORRIDOR, ARCADIA, BELTMOORE AREA, WE HAVE SEEING MORE SUPPLY OR CHOICE IN THE UNDER $250 BUT YOU ARE LOOKING AT MULTI FAMILY.
TED SIMONS: UNDER $250 IN ARCADIA GOOD LUCK.
TINA TAMBOER: NOT ARCADIA-- MAYBE GO A LITTLE LOWER EAST-- MAYBE SANDWICH BETWEEN THE BILTMORE AND CENTRAL AVENUE.
TED SIMONS: LOWER WEST AND NORTHER ARCADIA.
TED SIMONS: INTEREST RATES. WHAT ARE HAPPENING TO IN THE RATES? IS THAT A FACTOR IN THIS INCREASED OF HOME STARTS?
MIKE ORR: THEY ARE STILL RIDICULOUSLY LOW MY STANDARDS. IF YOU ARE A MILLENNIAL THEY SEEM NORMAL BUT FOR SOMEBODY LIKE ME WHO IS USED TO 8% FOR THE LONG TERM AVERAGE THAN FOUR IN A HALF-- FOUR, THAT IS PRETTY GOOD. EVERYBODY WAS PREDICTING IT WOULD GO UP AND OF COURSE EVERYBODY WAS WRONG ONCE AGAIN AND THEY HAVE ACTUALLY GONE DOWN FROM THE START OF THE YEAR.
TED SIMONS: I READ A STORY ABOUT THE COST OF BUILDING NEW HOMES WITH LABOR SHORTAGES, MATERIAL SHORTAGES AND CONSTRUCTION COSTS ARE SUPPOSED TO BE UP AND YET HOME STARTS ARE UP AS WELL.
MIKE ORR: DEMAND IS THERE. THERE WERE DEFINITELY CONSTRAINTS. BUILDERS CAN'T GET AHOLD OF ENOUGH LAND AT CHEAP ENOUGH PRICES TO GO CRAZY. THE PEOPLE WHO OWN LAND THINK THEY ARE IN A PRETTY STRONG POSITION SO THEY WILL WAIT UNTIL THE HOMEBUILDERS ARE ABLE TO PAY THE PRICE THEY WANT. ONCE THEY GOT THE LAND, GETTING ALL THE SKILLS THAT YOU NEED TO GET A HOUSE OUT THERE THAT IS TRICKY. YOU NEED SO MANY DIFFERENT TRADE PEOPLE AND SOME OF THOSE PEOPLE ARE HARD TO FIND THESE DAYS.
TED SIMONS: LAST QUESTION, WE KEEP HEARING MILLENNIALS THERE NOT BUYING-- THEY ARE STAYING AT HOME. THEY ARE LEAVING IN THE ATTIC-- UNDER THE BASEMENT. ARE THEY STARTING TO MOVE OUT-- ARE THEY STARTING IN BUYING. AGAIN IF THAT UNDER $250 IS SO STRONG THEY DON'T HAVE A CHANCE.
TINA TAMBOER: A LOT IS CONSTRAINED BECAUSE EVEN IF THEY ARE READY TO BUY THEY ARE FINDING THERE IS A HIGH LEVEL OF COMPETITION FOR THE TYPE OF PROPERTIES THAT THEY WILL BE PURCHASING. THEY ARE LOOKING AT MULTI FAMILY. IF THEY HAVE TO LIVE IN AN URBAN AREAS, WHICH A LOT OF THEM LIKE TO BE IN THE WORK PLAY LIVE TYPE OF ENVIRONMENT THEY WILL PROBABLY BE LOOKING AT MULTIFAMILY FOR THE MOST PART. IF THEY WANT A HOME THEY ARE BUYING OUT IN THE OUTSKIRTS. WAY OUT LIKE THE WEST SIDE AND AREAS LIKE THAT. SOUTH PHOENIX WHERE YOU WILL SEE THERE ARE YOUNGER MEDIAN AGES OUT THERE.
TED SIMONS: GOOD INFORMATION AND GOOD TO HAVE YOU BOTH HERE. THANKS FOR JOINING US.
MIKE ORR: THANK YOU.
TINA TAMBOER: THANK YOU.
Mike Orr: Founder of the Cromford Report, Tina Tamboer: Cromford Report
