Starter Home Construction Slows amidst Housing Recovery
Throughout the United States new-home construction has remained at historic lows despite the housing recovery that has been underway the past several years. Starter homes priced below $200,000 continue to shrink more so than any other housing division, as reported by the U.S. Census data. New homes priced under $200,000 have dropped in sales across the United States. They accounted for just 19% of sales in the U.S. in 2015, which is a considerable drop from 38% four years earlier. In comparison, property sales of homes that were priced several hundreds thousand dollars more rose to 34% of the housing market, a considerable jump from 2011’s 22%.
What we are witnessing a downward trend in sales for cheaper starter homes across the country. Trulia reported that new homes being built in the cheapest pricing distribution are shrinking. Down 16% from the year 2000. Developers have attributed this shift to the serious changes in the home building business. The profile of buyers has changed since the housing collapse.
Land Prices Slowly Dropping, Still High for Investors
Builders were investing in land on the outskirts of suburbs in the mid-2000s searching for new land to purchase and develop. When the housing market dropped the value of the land also dropped in value, as the demand for new homes dropped significantly. With so many Americans unable to afford not only new homes, but also the homes they currently resided in, lenders tightened their standards. This created a trickle down effect on first time buyers. This shifted builders’ focus to pricier homes, as buyers who could afford them became the primary source of profit.
As the market recovered, land prices naturally shot up as builders and developers competed for first time buyers. Higher land and developing costs have made development of first time homes a much more expensive venture for all parties involved.
Coupled with rising land costs, we may be witnessing a shift in the attitude of first time buyers. A recent survey from Bank of America reported that 75% of first-time home buyers would rather wait for a home that would meet their long-term needs than purchase a home based on its price.
Builders and developers are still on the fence about procuring land on the outskirts of major metropolitan areas, but a recovery is underway. Across the United States the prices for completed lots have almost returned to peak levels reported in 2006. As the housing market continues to recovery across the country we will see many more opportunities for first time buyers to find the home of their dreams.
Rent Prices Rise as Housing Recovery Continues
Many investors purchased foreclosure homes during the housing crash and turned them into rentals. These investors are now reaping the rewards through higher rent prices. This trend will more than likely continue as the market continues to recover and millennials return to the metro areas in Arizona.
Apartment developers have followed buyers and renters and continue to develop newer, more expensive apartment complexes across Phoenix and Maricopa county.
The Outlook for Arizona’s Housing Market
The outlook is good. Millennials and boomerang buyers have begun to return to the housing market after foreclosure and because lending practices have been loosened. The rent for homes, condominiums and apartments continues to climb sharply in many Arizona neighborhoods forcing prospective home owners back into the market. This means more opportunities for both home sellers and buyers for the foreseeable future in Arizona.