The East Valley housing market is starting to see a turnaround in home sale prices.
But with that turnaround, a spectre left over from the Great Recession looms: During the last few years, building had slowed down dramatically due an overabundance of available houses.
So as prices and buyers pick up, supply is being squeezed.
According to a recent report by the W.P Carey School of Business at Arizona State University, median single-family home prices in the Phoenix area rose to $162,500 in November from $157,000 in October and from just $120,000 one year ago — a 27.4 percent increase over the past 12 months.
In the East Valley in particular, Mesa saw a 27 percent increase in the monthly average — that’s based on price per square foot — over the past year, a number that led the region. Chandler was next at a 21 percent increase, followed by Gilbert at 20 and Tempe at 18.
Mike Orr, director of the Center for Real Estate Theory and Practice at Arizona State University’s W.P. Carey School authored the report. Orr said that despite a 31 percent jump in supply availability from October to December, supply is expected to dwindle well into the spring.
“It is (the most urgent issue the market faces) and I think it’s particularly difficult to solve because the shortage of construction workers,” Orr said. “The whole country has got a shortage of construction workers.”
As a near-halt in building took hold of the market, Orr said most workers entered different fields and the force of those left is being taxed by the rebuilding efforts on the East Coast following Hurricane Sandy and other wide-scale opportunities in Alaska and elsewhere.
On top of the shortage, Orr said the amount of young workers entering the construction field is dwindling.
“We don’t seem to be getting a lot of younger people moving into the construction industry,” Orr said. “It’s not very fashionable even though wage rates are going up quite fast right now because of the shortage.”
The Associated Press reported last week that some relief is on the horizon nationally as U.S. builders started working on homes faster in December than in any previous month in the past four-plus – a gain that boosted hiring by 30,000 jobs, the most in 15 months.
Locally, construction has jumped back into play in a significant way. While Mesa is seeing growth with the EastMark development, a 3,200-acre development at the old General Motors Desert Proving Ground, a host of other developments are either beginning or restarting in Chandler, Gilbert, Queen Creek, Ahwatukee and elsewhere in Mesa.
The viability of new home builders in the East Valley is also a positive sign for local new home buyers, according to the results of a recent study on the “Most Trusted Home Builders in America.” Based on interviews of 21,500 new-home shoppers nationwide and conducted by marketing research firm Lifestory Research, the study’s top 10 “most trusted” list included six firms currently building in the East Valley - Ashton Woods, David Weekley Homes, Trilogy by Shea Homes, Meritage Homes, Taylor Morrison and Woodside Homes.
Ashton Woods, which is currently building in Gilbert’s Morrison Ranch, finished atop the list, while Trilogy by Shea Homes was third overall but also the most trusted active adult builder, according to the study. Trilogy is currently developing as part of San Tan Valley’s Encanterra Country Club area.
Lifestory CEO Eric Snider said to the Tribune that trust is a key factor to consumers in home buying and that consumers are willing to pay up to 30 percent more for a home they trust.
Snider also found in the study that consumers are more suspicious of larger, public homebuilding firms and tend to trust smaller, more-regional entities more.
“The results at the national level came as a surprise because a number of the largest builders in the country did not rank in the top 10,” Snider said. “So if you look at the characteristics, they tend to be smaller, more regional builders that have more often a vested interest in the communities in which they operate and apparently consumers see that.”
Snider said some of the sentiment is also fallout from consumers blaming the largest companies for the conditions that caused the recession. The study also found 76 percent of those responding value trustworthiness a key factor in their home buying decision.
If true, the positive attention to East Valley homebuilders might only serve to squeeze supplies even further in the coming months – at least as quickly as the developers can continue to build.
Orr also said that as prices rise, more people will hold onto their properties to see their values rise.
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