Metro Phoenix is running out of land — land ready for new homes, that is.
There are, of course, thousands and thousands of acres of vacant land in metro Phoenix. But as new-home sales continue to rebound in the Valley, the supply of lots prepped and ready for houses is shrinking to the lowest level in many years.
Through May, new-home sales were up 38 percent from last year, according to the latest data from RL Brown Reports.
Arizona veteran land broker Nate Nathan estimates builders have enough land for about 18 to 24 more months of home construction in the Valley, based on the current pace of sales.
Of course, there’s still plenty of vacant land on the edges of metro Phoenix that can be turned into neighborhoods. But much of the available land is raw desert or farmland without streets, utility hookups and designated lots prepped for new homes.
It costs money and takes time to prep vacant land to become lots for houses. Builders can spend $5,000 to more than $15,000 per lot.
Homebuilders spent plenty to buy large tracts of Valley land in 2003-06.
But during the crash, many builders gave those parcels back to lenders because they couldn’t afford to prep and hold onto the land because there were so few new-home buyers.
Builders have definitely been more cautious about buying land. Valley land deals had been smaller and less pricey since the crash.
Then in March, builders Taylor Morrison Home Corp. and Pulte Homes partnered to pay $100 million for 1,200 lots of state-owned land near north Phoenix’s Desert Ridge neighborhood. It was the highest-priced sale for the Arizona Land Department in several years.
Maracay Home is paying $48 million for almost 475 lots in Peoria, the biggest land deal for a homebuilder in that Valley suburb in a decade.
New-home buyers are also paying more now. The median price of a new house climbed to $310,000 in May, according to RL Brown. That’s up from about $290,000 a year ago.
The rise in prices might be tied to fewer lots available in popular neighborhoods for new homes.
More than half of metro Phoenix's 10,000-plus square miles of land is vacant, but that doesn't mean that it can all sprout homes anytime soon or ever.
Many acres in the Valley are on Native American reservations and can't be developed into new neighborhoods. The region also has big swaths of preserve land, which hopefully will never be built on. Huge chunks of federal and state land surround the Valley, some of which could become new communities but not anytime soon.
And builders are not only paying more for land, their labor costs are up, too. A shortage of construction workers has led to higher wages and signing bonuses for some trades.
The dearth of Valley construction workers means it takes longer to build homes.
Nathan told me the average time to construct a home in metro Phoenix has gone from 90 days to almost six months.
If builders don’t have enough workers or land, it could slow metro Phoenix’s long-awaited homebuilding recovery.
Good thing new condominiums on Valley infill sites are drawing more homebuyers now.