Homebuilding across metro Phoenix is expected to hit a 14-year high this year, and apartment construction is at a near-record pace.
Still, the Phoenix area is in the midst of a growing housing shortage that’s pushing up home prices and rents, leaving many people with too few options to find a place they can afford.
Housing needed now for the Valley’s fast-growing population is taking longer to build because of labor and construction material shortages. Both are costly problems for builders, buyers and renters.
“Demand has been through the roof for homes, but there’s not enough supply,” said Jeff Gunderson, senior vice president of home builder Lennar, at a recent Valley Partnership meeting about Arizona’s population boom and its impact on housing. “Consumers are frustrated.”
He and others from metro Phoenix’s building industry say the shortage of construction and real estate service workers and difficulties getting everything from pipes to garage doors is limiting how many homes they can build, increasing costs and delaying construction.
The Biden administration’s new plan to spend more than $300 billion to add more than 2 million affordable homes across the U.S. during the next three years is expected to help. It focuses on increasing home sales to people who plan to live in them and nonprofits creating affordable rentals while slowing sales to large investors.
More details on the housing plan to tackle the nation’s housing shortage are expected out soon.
About 26,300 new metro Phoenix homes have sold so far this year, according to Zonda’s Belfiore Real Estate Consulting.
The group is forecasting 35,000 houses will be built Valleywide this year, the most since 2007.
But the demand from buyers is for even more new homes. Earlier this year, homebuilders had waiting lists with as many as 50 buyers for Valley subdivisions.
That’s why the median price of a new Phoenix-area home hit a record $450,000 in August, up almost 29% in a year.
About 32,700 new apartments are currently underway across the Valley, according to real estate brokerage Colliers. But only 11,000 of those rentals are expected to be completed this year, and that number could drop due to labor and material problems.
Metro Phoenix’s average rent climbed 15% during the past year, almost four times the average U.S. rate, reports the brokerage.
Despite the many new apartments opening up, the Valley’s vacancy rate is only about 3%, the lowest it’s been since the 1970s.
Metro Phoenix’s resale market has been dealing with a severe shortage of homes for sale during the past year. It’s easing a bit for buyers with the number of listings ticking up, but it’s still a sellers’ market, with many listings leading to bidding wars.
The Valley’s median sales price hit $405,000 in July, up almost 29% from a year ago.
Forecasts call for the Valley to draw about 90,000 people a year until 2030, so the housing problem is expected to get worse.
“We are in the eye of a perfect housing shortage storm that will most likely continue through the end of next year,” said Thomas Brophy, national director of research for Colliers of Phoenix. “Labor and materials shortages are growing problems which I tend to think will increase, perhaps to the point of a crisis of sorts, over the next 18 months.”
Metro Phoenix’s growth has led to housing booms and busts since the 1950s, so any talk of ramping up homebuilding often raises concern.
The boom of 2005-06 led to tens of thousands of new Valley homes sitting empty during the subsequent recession.
But during the peak in 2005, almost 60,000 new houses went up, about twice the current pace of construction.
The Valley doesn’t have the labor force to near that construction pace now. More than 200,000 construction jobs in metro Phoenix were lost during the Great Recession housing crash. The industry still hasn’t bounced back.
Metro Phoenix also lost construction workers during the pandemic, even as new home sales climbed and apartment construction ramped up. Since February 2020, the number of construction workers fell by 400 to 136,800, according to the Associated General Contractors.
“We are all competing for the same labor pool,” said Matt Linaman, Phoenix division president for Starlight Homes.
He said even though new-home permits are climbing, it doesn’t mean that many Phoenix-area homes will be built because all builders are dealing with long-term labor and supply chain problems.
As long as demand outpaces supply for metro Phoenix housing, home prices and rents are bound to keep climbing.