New-Home Sales Soar Past Re-Sales in Valley

Article originally posted on HERE on April 11, 2024

One of the leading analysts of the Valley’s housing market said recently that homesellers’ position is improving but it also indicated they may be facing strong headwinds throughout the year from homebuilders and new home sales.

“The change is minimal but it is the first time since Jan. 18 that we have seen an improvement for sellers instead of a deterioration,” the Cromford Report said, calling Tempe and Avondale “primarily responsible” for a positive uptick in sellers’ position in the market. It added that its data also show Scottsdale and Maricopa have contributed a bit to the upward movement for sellers.

Looking deeper at its data for the 17 Valley submarkets it monitors, the Cromford Report said, “Chandler is so far ahead at the top of the table that it has no serious rival at the moment.”

Stating “10 out of 17 cities are still seller’s markets,” the Cromford Report said Mesa and Tempe, respectively, rank the fifth and sixth most favorable for people with homes on the market.

The Cromford Report also said buyers can find a little light in the housing scene with a continuing rise in the number of homes for sale to a total not seen since before the pandemic.

“Supply has been gently increasing since the start of 2024 and has reached comfortably north of 17,000,” it said, reflecting a total for Maricopa and Pinal counties. “This is still well below the long-term average but is the highest total we have seen in late March since 2019.”

But there also is trouble in paradise where sellers are concerned, the Cromford Report indicated.

“Re-sales have been suffering from strong competition from new homes and this source of supply is looking stronger than last year,” it said. “In February there were 2,810 single-family home permits across Maricopa and Pinal counties – which is the highest number since March 2022 and up 107% compared to February last year.”

Last week it offered more indications that the new-home market is rapidly gaining steam, reporting that in the first two months of this year, 3,351 deals closed on new homes in Maricopa and Pinal counties – the highest number of new-home closings in 18 years and 16% over all of 2023.

“New homes are taking a lot of the demand away from re-sales,” the Cromford Report said, noting closings on Maricopa County resales in the first two months of this year were down a half percent while new-home closings were up 10% over what they were a year ago.

“New homes are very competitive on price,” it continued, noting the square-foot-price average on new homes is $269.75 compared to a $298.55 square foot price average for re-sales. Part of the reason for that, however, is that most of those new homes are on the fringes of the Valley.

“With working from home become more common, you can save yourself a lot of dollars if you are willing to live further out,” it said.

While the 1,147 multifamily permits issued in February reflected a 51% decline from a year earlier, the Cromford Report noted they comprise “a very lumpy number which fluctuates wildly from month to month.”

“It makes more sense to look at an annual running total,” it said of multifamily permit – which at 20,000 “is twice the level we regarded as normal until 2022.”

Apartments aside, new-home construction in the Valley may present a challenge going forward for re-sale homes.

“Sellers should expect to be facing increased competition from the new home builders over the coming 12 months,” the Cromford Report said.

Because of timing, the Cromford Report made this prediction prior to the March 26 collapse of Baltimore’s Francis Scott Key Bridge following a collision with a massive container ship that lost power.

By the end of last week, the National Association of Home Builders issued a warning that the collapse and virtual shut-down of a key East Coast port “is expected to cause supply-chain disruptions” for the homebuilding industry.

The NAHB said the top imports related to the home building industry include: plywood, veneered panels and similar laminated wood, which last year comprised 16% of the U.S. total import value for 2023; gypsum, for which the Baltimore port was the biggest gateway in America; and sawn lumber, for which Baltimore has been the 11th most important port.

Nevertheless, like the disaster’s impact on other sectors of the economy, it was still too early for most analysts to assess the full scope of how the collapse will play out in the housing market. Many analysts appeared to indicate that the auto industry would be among those sectors of the economy that will feel the most pain.