The Phoenix Housing Market Letter - Constant...

The Phoenix Housing Market Letter Metro Phoenix Housing Market Data and Analysis -Since 1985 The most accurate, timely and trusted housing market data available in the region

Published by RL Brown Reports/Home Builders Marketing, Inc. 480-614-0211 – www.rlbrownreports.com – Greg Burger and RL Brown

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1 Volume394 - September 18th with August 2017 data Copyright 2017 – Home Builders Marketing, Inc. – All rights reserved

Another “wow” month for Phoenix housing......

August was another strong month for Phoenix housing, with new home closings having the best month since last December, new home permits the best month since May, and resale housing bouncing back from the July doldrums.

Let us start our look at the latest Phoenix housing market data with permit activity.

August had the best permit activity that the region is seen in any August going clear back to 2008, and as the graphic above shows we have seen steady progress in new home permit activity in every August with the exception of August 2014.

August permits were up 12.51% from August 2016 and permits year-to-date are up 8.58% from

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AUGUST PERMITS 2010-2017

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last year’s strong performance. Year-to-date here in 2017 we have counted 13,363 new home permits vs. 12,307 last year to date.

The heat map on page 1 shows the permit hotspots across the region in August, and demonstrates that there is strong new home permit activity in virtually all areas across the region. The red areas show the highest concentrations of August permit activity, followed by the yellow areas and then the green areas for relative permit intensity. Serious students of the marketplace will note that the red areas are spreading, encompassing new locations, as 2017 progresses.

A careful look at permit data shows that a lot of this “spread” reflects the growth of new communities offering more affordable new housing, much of which is in areas that had relatively little housing activity a year or so ago.

The two graphics above show the locations of the active new home communities in the Southwest submarket (on the left) and the Southeast submarket (on the right) using the green icons overlaid over the permit hotspots for the month. They demonstrate the impact these more affordable communities are having on the regions housing activity, both in the Southwest and Southeast submarket’s.

The effects are similar in other parts of the Metro Phoenix area where land opportunity and costs have allowed builders to produce more affordable housing.

This shift in product positioning over the last several months is also reflected in the track of new home pricing across the region. The median home price this past month was essentially unchanged from July, calculated at $302,644 for August. From September 2016 through June 2017 the median new home price at ranged from $309,000-$319,000, demonstrating the impact on the region’s median new home sales price of these product shifts. We can anticipate further flattening of the median new home price track as additional affordable products or brought online by more and more builders targeting a broader market profile.

The scatter graphic on the following page plots the individual new home closing transactions by closing price that occurred in August and shows the growing numbers of closings in the middle and lower price ranges.




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This is a trend that will be closely followed by just about everybody involved in the production of new housing in this marketplace, from land sellers and brokers, to suppliers and subcontractors, to Realtors active in showing new home products to their prospective clients, and certainly to homebuilders seeking land for new communities and positioning future product.

It is also interesting to note that resale housing prices continued to flatten out, with almost no changes in resale housing prices over the last three months.

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PHOENIX AUGUST NEW HOME COE PRICES - LESS THAT $600K

A question for you ..... Are you getting the most bang for your housing market data $$$$$? When our housing market is changing as rapidly as we are witnessing here in Metro Phoenix, accurate, current, and complete market data can be critical to the optimal positioning of your business and your products. We would like the opportunity to show you how to maximize those data $$$$ by comparing our products and reports directly with those you are currently using. Call Greg at 480-614-0211 and let him prove to you that we are the best value in housing market data!




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New home closings are where the rubber hits the road and the money hits the bank ..... And this month we saw new home closings increase by 15.69% from last August, as closing activity reflects the surge in permit activity in the early part of 2017.

We counted 1674 home closings this August vs. 1447 last August and year-to-date here in 2017 we have counted 11,968 recorded new home closings vs. 9708 for the same period last year, representing an increase of 23.28% in closing activity year-to-date.

While the relatively extended time between permit and closing continues in this marketplace, several of our builder clients report some shortening of production times. However, build times generally remain in the range of 5 to 6 months for many communities, and is one of the reasons that a growing number of homebuilders are focusing more and more on spec housing starts to allow them to have inventory available for the increasing numbers of sales to Realtor-assisted prospects who do not desire or cannot wait for a six months delivery of their new home.

The graphic on the left looks at new home permit and closing activity for August based upon the lot size that activity occurred on.

While there should be no surprises to the astute land sales and acquisition guys and gals or their builder clients, it is interesting to note where permits exceed closings and closings exceed permits in various categories possibly providing additional evidence of product shifts in the marketplace.

NEW HOME CLOSINGS Aug-17

SALES BY MONTH 1674

SAME MO LAST YEAR 1447

PERCENT CHG 15.69%

YTD CLOSINGS 11,968

YTD CLOSINGS LASTYR 9,708

PERCENT CHG 23.28%

AVG NEW PRICE 370,533

MED NEW PRICE 302,644

MED PRICE % CHANGE 0.02%

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AUGUST NEW HOME ACTIVITY BY LOT SIZE

AUG COE AUG PERMITS




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We also looked this month at the breakdown of August new home closings by both price range and by the type of financing used for the purchase. This information can be useful to a broad spectrum of our housing industry clients.

When we analyze August permit and closing activity by product type we note that there appears to be a consistency between permits and closings in each product type and that detached housing continues to be the dominant housing in the region. (Note that much of the custom housing activity does not show a closing because the lot is already entitled in the name of the custom home client.)

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Next we turn to the rankings of master-planned communities, new home communities, and homebuilders for the month of August 2017.....

This month we start with the top 10 master plan communities in the region for the month of August based upon their permit activity for the month.

Eastmark, with multiple homebuilders’ active, continues to lead the master-planned community activity was 61 permits issued in that master-plans for the month.

Tartesso, with DR Horton-Express entry-level product, is tied with Vistancia, also with multiple homebuilders, for the second-place honors for the month.

If you haven’t checked for some time, there are a number of new master-planned communities that have emerged with strong numbers just over the last several months.

Many of these communities offer the opportunity for more affordable housing product positioning than we have seen in some time and many are geographically positioned in areas that have not seen substantial housing activity for some time.

Also note that the adult segment of Verrado, named Verrado-Victory, is listed separately from the remainder of that master-plan. In combination, they would rank number four in permit activity for the month.

This month we take a different look at our home builder rankings ..... As you will see on the following page.

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PERMITS

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EASTMARK 61 51 25

TARTESSO 42 25 6

VISTANCIA 42 39 33

MERIDIAN 36 22 23

ADORA TRAILS 33 27 0

SANTA ROSA SPRINGS 32 2 0

TIERRA DEL RIO 32 32 23

WATSON ESTATES 27 8 10

COOLEY STATION 25 29 44

VERRADO 25 28 23

MAGMA RANCH 24 4 1

ENCANTERRA @ JOHNSON FARM 23 16 6

IRONWOOD CROSSING 23 25 17

ZANJERO TRAILS 22 0 4

BLUE HORIZONS 21 21 10

MORRISON RANCH 20 30 22

BELLA VIA 19 7 3

ESTRELLA MTN RCH 18 32 27

HOMESTEAD 18 19 17

VERRADO/VICTORY 17 8 15

ASANTE 16 8 6

CAMINO A LAGO 16 19 12

DESERT OASIS 16 8 10

RANCHO CABRILLO 16 24 1

GLENNWILDE 15 5 2

MORNING SUN FARMS 15 9 4

RIO PASEO 15 0 0

WICKENBURG RANCH 15 2 16




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Using our August 2017 permit count we rank the top builders for the month (those with 22 or more permits) and compare their permit market share capture for this month with their permit market share capture in August 2016, noting the change in market share, plus or minus, between this most recent month and 13 months ago.

BUILDER - AUG 2017 PERMIT RANK

PERMITS AUG 16

AUG 2016 SHARE

PERMITS AUG 17

AUG 2017 SHARE

MARKET SHARE

CHANGE

D R HORTON 144 9.14% 238 13.43% 4.29%

MISC CUSTOM 159 10.10% 193 10.89% 0.80%

MERITAGE HOMES 122 7.75% 96 5.42% -2.33%

LENNAR HOMES 75 4.76% 94 5.30% 0.54%

PULTE HOMES COMBINED 77 4.89% 88 4.97% 0.08%

SHEA HOMES 52 3.30% 74 4.18% 0.87%

TAYLOR MORRISON 107 6.79% 70 3.95% -2.84%

CALATLANTIC HOMES 98 6.22% 65 3.67% -2.55%

FULTON HOMES 69 4.38% 64 3.61% -0.77%

MARACAY HOMES 23 1.46% 52 2.93% 1.47%

WILLIAM LYON HOMES 32 2.03% 51 2.88% 0.85%

KB HOME 45 2.86% 49 2.77% -0.09%

MATTAMY HOMES 64 4.06% 47 2.65% -1.41%

RICHMOND AMERICAN 39 2.48% 45 2.54% 0.06%

LGI HOMES 17 1.08% 42 2.37% 1.29%

BEAZER HOMES 19 1.21% 35 1.98% 0.77%

GARRETT WALKER HOMES 30 1.90% 34 1.92% 0.01%

ASHTON WOODS HOMES 35 2.22% 29 1.64% -0.59%

ROBSON COMMUNITIES 15 0.95% 27 1.52% 0.57%

BLANDFORD HOMES 22 1.40% 25 1.41% 0.01%

WOODSIDE HOMES 25 1.59% 23 1.30% -0.29%

TOLL BROTHERS 15 0.95% 23 1.30% 0.35%

K HOVNANIAN 47 2.98% 22 1.24% -1.74%

PINNACLE WEST HOMES 16 1.02% 22 1.24% 0.23%

COURTLAND COMMUNITIES 9 0.57% 22 1.24% 0.67%




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The runaway market leader using this methodology was DR Horton, whose market share capture based upon permit activity rose from 9.14% in August 2016 to a very strong 13.43% in this August. Maracay Homes and LGI homes also saw significant gains in their market share between the two months.

Nine homebuilders saw declines in their market share capture over the period while 16 builders saw increases in their comparative market share between these two snapshots. Obviously, this data reflects only the activity by permits in each of the two months and may not be reflected in either twelve-month data or in year-to-date permit data. (That data is available for both permits and closings in our monthly Data Summary Report, which ranks every builder and every new home community with activity both every month, year-to-date, and for the last 12 months. To access that report, give Greg Berger a call and 480-614-0211.)

Turning to resale activity, in August we saw 9379 recorded resale transactions, including for sale by owner transactions not included in ARMLS reports.

Represents a 5.3% increase in resale home activity over the same month last year, but remains below the pace of resale activity from March through June of this year when we saw resales in the 10,000-11,000 range.

However, year-to-date our Metro Phoenix area resale activity is 8.91% above the activity of the same time last year, with 74,423 resale transactions recorded vs. 68,333 transactions recorded last year through August.

Resale home prices continue to remain generally flat, as noted earlier, with the resale median price for August of $230,000 vs. the median resale price in August 2016 of $219,000 but with prices reflecting the little change since April of this year. The average resale price for August was $279,788.

Resale homes accounted for 84+ percent of the total housing activity in the region in August and over 86% of the total home sales in the region year-to-date. We can expect that this level of resale housing activity will continue over at least the near-term and that increases in the market share capture by newly constructed housing will be a function of the relative price gap between new and resale housing as well as a growing availability of more affordable housing in the new home sector.

Resale sales agents are increasingly active in the sale of new homes, attracted by the homebuilder spec inventory available and by the shortage of resale home listings as well as by dramatically enhanced effort by many homebuilders to reach out to the real estate agent community and use them as active and effective sales agents for their new home products. Real estate agents seeking business from millennials are increasingly recognizing that new home products of builders adding affordable housing to their product mixes offer attractive alternatives to not only millennial buyers but also to those downsizing from their Mac mansions.

RESALES Aug-17

RESALES BY MONTH 9,379

SAME MO LAST YR 8,907

PERCENT CHG 5.30%

YTD RESALES 74,423

LAST YTD RESALES 68,333

PERCENT CHG 8.91%

AVG RES PRICE 279,788

MED RES PRICE 230,000

MED PRICE % CHANGE -0.86%




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Last month on these pages we looked at the relative product positioning of new homes being offered in a part of the Mesa-Gilbert-Queen Creek submarket area .... And this month we take a similar look at an area of north Peoria in our Northwest submarket area.

There were 17 new home communities active in this mini market area that had four or more new home permits in August. These communities were built by 11 different homebuilders.

There is a wide range of products offered by these builders as shown on the graphic above. We plotted these builders on the graph based upon the number of new orders they reported over the last four months. The leading builder/community is shown in red, the number two community

in green, and the number three community in blue.




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Looking at the top new home communities with detached housing product for recorded escrow closings in August we plotted the price and square footage product parameters for those communities with 12 or more new home closings for the month on the graphic below. Once again, the community shown in red was number one Valley wide for recorded escrow closings, followed by a number two in green and number three in blue. The other communities shown on the graph had more than 11 closings in August. Active adult communities were not included in this calculation and ranking. (A complete ranking of August, year-to-date, and 12 months closing and permit activity for every community in the Valley is available. Call Greg at 480-614-0211.)

BUILDER SUBDIVISN LOTSIZE MIN SQFT MAX SQFT MIN PRI MAX PRI

D R HORTON/EXPRESS TARTESSO 1/2A 48X125 1454 2535 162990 208990

MERITAGE HOMES THE PARKS A/B 50X115 1859 3737 213490 297490

D R HORTON/EXPRESS COPPER BASIN 5B/5C1/5C2 50X120 1599 2229 174490 205990

PULTE HOMES FESTIVAL FOOTHILLS 1,2/CACTUS SERIES 68X120 1398 2693 186990 242990

PULTE HOMES TIERRA DEL SOL/TRAILSIDE AT HAPPY VALLEY RANCH PHASE IVAR 1684 4038 275990 550990

We offer a variety of printed and electronic reports as well as our comprehensive Magic Pro housing data application and prepare custom data reports and comprehensive market analysis using the region's most sophisticated and up-to-date housing market data. We can provide what you need, when you need it, and for a price that you can afford. Let us discuss your needs and how we can meet them and how our products compare with any others available in the marketplace. Call us at 480-614-0211. We want to earn your business!




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Perspective…… August was indeed another solid housing month for the Metro Phoenix area, with strong performances in both new homes and in resale housing activity. As we have analyzed what happened in this housing market in August it is obvious that there is good activity across a spectrum of pricing, lot configuration, product type, and location in the region. More and more builders have recognized unmet demand for housing outside of the previous housing hotspot areas and across a broader spectrum of product positioning and pricing. The August data we have examined clearly shows the results for those builders taking advantage of what had become a near-void in the marketplace for new homes in the region. Likewise, the August results demonstrate the fruits of involving the general real estate community in the marketing efforts of new homes, attracting buyers to their communities whose Realtors might otherwise have steered their prospects away from new housing and away from those builders who have not moved to tap that general real estate agent resource. Savvy real estate agents are doing their homework and have found that today’s new home offerings can compete very favorably with the limited supply of real estate listings and can make their real estate transactions smooth and profitable. So, while the real estate story overall in Metro Phoenix is positive and is demonstrating increasing strength, there are some factors that we all should be concerned about, most certainly including the potential effects on our industry of the devastation of Harvey and Irma on Texas and parts of the Southeast. There are untold thousands of homes and businesses that will need to be rehabilitated or replaced across a wide swath of areas of large populations and dynamic economic and housing market activity. The ripple effects of the money needed to rebuild, the materials for both rebuilding and replacing, and the labor to accomplish the tasks cannot be calculated at this point in time. But, it would be extremely shortsighted on our part to not realize that these resource demands can be expected to change the dynamic in our own Phoenix housing market, especially for construction materials and construction labor, both of which have little slack without additional external demands. While there is much conversation about the impacts of these catastrophic events the local building community needs to be prepared for increased materials and labor shortages and for increased prices due to those shortages, especially over the next several months. It remains to be seen if events will impact housing deliveries and permit closing activity over the next several months. It will behoove us all to pay close attention to price futures for materials and the availability of construction labor here in Phoenix. Even as the market data reported herein continues to be positive, the market share capture of new homes vs. resale homes here in Phoenix remains at historic lows relative to the vibrant housing markets




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of the past. This month new homes captured just less than 15% of the new housing activity while historic overall total housing numbers for the region remained strong and increasing.

The new housing segment here in Phoenix currently is performing at about the same velocity level as it was in 1993-1994, or in the range of just under 2000 new homes per month. At the same time, the overall total housing activity in the region has now exceeded the level we achieved in 2003-2004, but the market share capture of new housing is dismal vs. the performance prior to 2008-2009. Part of this is because those earlier periods were periods of very strong population growth that exceeded the capabilities of the existing housing stock, with the demand being filled by new housing vs. existing housing. Absent more robust population growth it is possible that the current relationship between total housing demand and new housing should be considered the “new normal”. There are a growing number of market observers that have reached that conclusion! We also note as we view this month’s statistical data that permit activity in Pinal County in August appears to have somewhat stagnated even though year-to-date permits are up some 45% for the same period of last year. Hopefully you are aware that there is a major push for positive voter action to approve extensive transportation improvements proposed for Pinal County. We think it is obvious that the growth in Pinal County has been seriously hampered throughout this housing recovery at least partially of transportation issues.

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NEW HOME SALES BY MONTH RESALES BY MONTH PHOENIX TOTAL HOME SALES BY MONTH




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Pinal County has the opportunity to once again “blossom” as a major housing market with development of the under-construction South Mountain Freeway and the proposed transportation improvements that are part of the bond proposal about to go before the voters. The several proposed new industries and activities currently under consideration for Pinal County coupled with appropriate transportation arterials should position Pinal County to once again be a major player in Metro Phoenix housing. It will be up to the voters! That is a wrap for this 394th edition of The Phoenix Housing Market Letter. Thank you for being a subscriber. We are fully prepared to help you get your share of housing activity in the days to come. Give us a call at 480-614-0211, tell us your needs, and watch us perform. Have a great day! RL Brown and Greg Burger Note: All of the housing data and analysis used in the market letter was created using Volume 394 of our MAGIC Professional Housing Data Application and is protected by Copyright 2017, Home Builders Marketing, Inc, with all rights reserved. Contact us at 480-614-0211 for permission to reproduce or to re-use. Quotations from our works must be properly sourced.

Magic Pro and many of our other housing market reports are now available for the Denver-Front Range area of Colorado … with the same features, comprehensive data, and analysis tools that are available to Phoenix housing professionals. Call us at 480-614-0211 to access this state-of-the-art market intelligence tool.


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