New homes are going up in metro Phoenix at the fastest rate since the housing boom of 2004-06.
But many buyers are stuck on waiting lists with as many as 50 people ahead of them.
New communities from Surprise, Buckeye and Goodyear in the West Valley to Queen Creek and the city of Maricopa in the southeast Valley are drawing the most buyers. The areas are home to some of the region’s most affordable new subdivisions.
Builders facing rising construction costs for labor, lumber and land are capping sales at many Valley new home subdivisions.
And the number of speculative-built houses — built and ready to sell — is at a near-record low.
Despite rising construction costs, one of the lowest spreads between new and existing home sale prices in metro Phoenix history is giving homebuilding a boost.
Also giving new home sales a boost is rising demand from buyers who are facing bidding wars for a shrinking supply of resales.
Housing analyst RL Brown said, through April of this year, homebuilding permits are up 36% from last year, even though homebuilders are facing “substantive increases and unknowns in costs.”
Higher lumber prices have upped the cost of building a new U.S. home almost $36,000 during the past year, according to the National Association of Home Builders.
Many housing contractors are struggling to find enough workers to keep up with new home demand.
Nationally, single-family housing starts fell by more than 13% in April, compared with March, according to new U.S. census data. Housing starts are typically tracked by building permits.
But Valley new home permits shot up 68.5% in April to 3,153, compared to 1,871 in March, according to Brown’s Phoenix Housing Market Letter.
The median net price of a new home climbed to a record $403,400 in April, reports Zonda’s Belfiore Real Estate Consulting. That’s up about $12,000 from March of this year, and an almost $60,000 jump from April 2020.
The median price of an existing Valley home is now about $375,000. The spread between Phoenix-area new and existing home prices is typically more than $50,000.
Only about 628 speculative new homes were built and available for sale in metro Phoenix last month. That’s down 72% from a year ago.
“It is clear that builders have stopped building inventory homes, a rational approach given the amount of demand in the market and the large waitlist and interest list backlogs the builders have to work with, said Zonda senior analyst Steven Hensley about metro Phoenix's home building market.
“Many homebuilders are reporting 25- to 50- person waitlists to purchase a new home," he said.
The Queen Creek/Hunt Highway area in the southeast Valley drew almost 2,400 new homebuyers during the last quarter of 2020, the latest data available. That’s more than any other metro Phoenix area and a 24% increase from the same period in 2019, according to Zonda/Belfiore.
Surprise saw the most new home sales for the West Valley, with 1,818 during last year’s last quarter. That’s up from 1,458 for the same period in 2019.
Sun City Festival in north Buckeye ranked No. 1 for new home building in April with 67 permits, according to RL Brown.
Tartesso in Buckeye was second for new home permits, with 58 last month.
The Valley’s shortage of resale homes and rising costs are expected to drive up the median price of new homes between 11% and 16% during the rest of 2021, according to housing analysts.
Homebuilders are trying to hedge rising construction costs with escalation clauses in buyer contracts. The clauses allow a seller to pass along rising expenses onto the buyer after a sale’s price has been negotiated.
About 47 of U.S. builders said they are adding escalation clauses to prices due to rising material costs, according to the Home Builders Association and Wells Fargo Housing Market Index survey.
Metro Phoenix homebuyers on waiting lists for new houses could see higher prices by the time its their turn to buy.