Land Market in Maricopa and Pinal Counties
April 26, 2016 |
President & Designated Broker, Nathan & Associates, Inc.
In the second quarter of 2016, Maricopa and Pinal counties are experiencing a growth spurt which is gaining momentum each day. When the federal government shut down and FHA dropped their maximum lending rate taking approximately 20 percent of home buyers out of the market in 4th quarter 2013, it had a direct effect on the land market. As a result, 2014 was a dismal year for new home permits. Since February 2015 when consumers finally came out to buy homes, the land market has been improving consistently and today the market continues to remain very strong.
Lot inventory is decreasing at a rapid rate with a current sales pace at 2.3 sales per month – per subdivision. As of April 2016, the Maricopa and Pinal county areas have approximately 538 active subdivisions. At the current sales rate, over 230 of these subdivisions will disappear over the next 12 months.
The current population and job growth predictions for Arizona over the next ten years increasing by a million people, have put pressure on the major homebuilders to increase their lot inventory and land holdings in Maricopa and Pinal counties.
There are two issues affecting homebuilders to underwrite deals that will work in today’s market. The first issue is the shortage of labor and the cost of that labor. Although we recovered our job loss from this past downturn, we are desperately in need of framers, plumbers and all tradesmen of the construction industry. The second issue affecting our ultimate recovery is the current underwriting requirements by the major homebuilders’ corporations and boards. Inventory replacement is incredibly difficult due to zero appreciation in underwriting models, 20 percent to 23 percent gross margins and companies requiring today’s house prices for future land deals. Other states in the nation are able to achieve these margins which is redirecting capital allocation to those areas. Several homebuilders share the opinion that slowly, but surely, the trades are coming to the Maricopa and Pinal county market.
When combining the expansion of transportation corridors and the fact that Maricopa and Pinal counties have one of the most affordable housing markets in the nation; Arizona is a right-to-work state; we have a diverse and maturing economy with great weather and our pro-growth environment, it is my opinion that Arizona real estate is going to explode over the next 20 years. I have been in the real estate business for 38 years and owned Nathan & Associates, Inc. for 35 years. I have directly experienced doing business in Arizona’s five downturns and survived all of them. I am in constant contact with every facet of the real estate industry and I am honored to be part of the real estate market in Phoenix and Tucson. I am excited for all of you to experience such a thriving time in Arizona real estate as well.
If you would like to hear more detail about the Arizona land market, I will be sharing more information at the upcoming commercial seminar on May 27th in Scottsdale at the Arizona School of Real Estate & Business.
Nate is a member of the Urban Land Institute (ULI) and serves on the ULI Community Development Council (Silver Flight). Nate is also a member of Lambda Alpha International, the Home Builders Association of Central Arizona, Valley Partnership and several other organizations. Nate can be reached at 480-367-0700.
Commercial 360° Seminar
FRIDAY, May 27, 2016 – 9:00 AM TO 12:30 PM
This seminar is for anyone wanting to learn about growth and development in Arizona.
Learn from industry leaders regarding Arizona and Salt River Pima economic development, land availability, trust land funds, energy and water plans as well as a current market update – hear how all these factors effect the state’s growth and the real estate industry. Tempe Mayor Mark Mitchell will also provide some detail on how projects in Tempe are creating a positive influence for the state of Arizona.
Credit: 3 hrs. Legal Issues