A concern that I hear often from friends and clients in the east valley is do I think we are overbuilding and do you see us heading for another huge crash like we saw in 2008? The short answer to this is very simple. SUPPLY is not keeping up at all with DEMAND. Believe it or not we are seeing an inverse problem of what brought about the housing bubble crash in 2008.
Instead of seeing record amount of permits to build homes that exceeded the amount of buyers out there, in the east valley we are seeing very few housing permits to meet the large demand.
Lets take a look at the numbers:
November was a strong month for single family permits in Maricopa and Pinal counties. We counted 1,355 which is up 23% from 1,099 in November 2015. The year-to-date count is 16,966 which is up 11% from the year to date total in 2015. Since closings on single family new homes have reached 34% higher than last year at this time, the number of permits is not keeping up the pace.
The overall shortage of supply has been getting more extreme in Chandler, Gilbert and Tempe. Gilbert was top city for many years but has now slumped to 7th place in November with only 99 permits. Chandler comes in 9th with 70. With few vacant land locations, Tempe is way behind with only 10 permits.
The top permit locations in November were:
Phoenix – 194
Peoria – 120
Unincorporated Pinal County – 105
Looks like there will be plenty of supply in Buckeye, Peoria and the North Valley in 2017. However the big concern is that buyers will have a very hard time in the Southeast Valley given the unusually weak supply trends of the past 3 months. Only Mesa seems to be keeping up with demand whereas Gilbert and Chandler are running out of land to build on which means existing home prices will most likely continue to rise as long as there is strong demand to buy in these cities.