Valley homebuilder industry too popular to keep up with rising demand
This story is part of KTAR News’ “Arizona’s Rising Real Estate” weeklong special series on 92.3 FM, online and our app.
PHOENIX – Phoenix is one of the hottest real estate markets in the country, and buyer demand refuses to die down despite increasing home prices.
The Phoenix metro area is down to an eight-day supply of available housing when it usually has a six-month supply.
Due to the limited inventory of houses on the market, buyers are now looking to homebuilders in hopes of avoiding bidding wars and trying to compete with cash offers.
“The home building industry is busy, it’s robust, and it’s uncertain,” Jackson Moll, vice president of Municipal Affairs with the Arizona Home Builders Association of Central Arizona, told KTAR News 92.3 FM.
The industry has its own set of obstacles that are accompanied by a high price tag. It’s the result of a perfect storm between a surplus of buyers, a shortage of labor and sky rocketing prices in the construction sector.
One item soaring in price is lumber.
The National Association of Home Builders (NAHB) has been tracking the phenomenon. It found the price of framing lumber is nearly 250% higher since last April, from $350 per thousand board feet to now $1,200.
That increase alone is adding nearly $36,000 to new home prices, according to NAHB.
Industry experts believe several events led to the lumber shortage, including COVID-19 lockdown orders and closures as well as new safety protocols that slowed production at mills.
Despite all of that, there is some good news.
“Phoenix has a lot of really, really good homebuilders,” Moll said. “Most of the publicly traded companies in the home building industry are active in the Phoenix market, so you’ve got a lot of different builders to choose from, you’ve got a lot of different products to choose from.”
Although buyers of new builds have control of what their future home will look like, there is still plenty of uncertainty involved in the process today, such as when their home will be ready.
As of the beginning of May, new home builds in metro Phoenix were reported to take nearly a year to complete, according to the Arizona Home Builders Association of Central Arizona.
“Some of it’s going to depend upon how much influence the homeowner had in choosing options and the size of the home, but a good rule of thumb is 10 to 12 months,” Moll said. “For context, that’s roughly 10-25% longer than it would have been at this time [compared to last year].”
That extended wait time is a direct result of the labor shortage here in Arizona.
“I know there’s particular trades out with the work they have started right now that are four to five months behind,” Mike Brewer, vice president of the American Subcontractors Association of Arizona, said.
The labor shortage in Arizona is not pandemic-related, but rather just a sign of the time, according to Brewer. He started his own plumbing business after working for another subcontractor for several years.
He believes times have changed in their workforce and with that, there are far fewer subcontractors today in Phoenix.
As a result, fewer workers are now asked to fulfill the major demand of building new homes in the Valley.
“We look at it as a manufacturing process almost, but instead of being an assembly line, it’s the trades showing up on-site every day and doing the next component, building that next piece,” Brewer said.
Meanwhile, the Phoenix construction market has exceeded the national U.S. average since 2016, according to a report compiled by the research firm Cumming.
In 2021, Phoenix ranked No. 5 in the country for the top 10 cities for construction workers.
As Arizonans fight to find homes for themselves while there seems to be a mass exodus from California, many are asking the million-dollar question – when will this madness end?
Brewer believes that question is nearly impossible to answer.
“When does demand slow down so that the demand fits the workforce and the supply chain … I don’t know how anybody can give you a definitive answer around that,” he said.