The Greater Phoenix housing market maintained its pace of steady improvement in the last six months of 2016, which encouraged an acceleration in land sales.
Total land activity was nearly identical to 2015 and projections indicate continued momentum throughout this year, according to a report released by Colliers International in Greater Phoenix.
Permitting for both single-family and multifamily housing rose from 2015 to 2016 with the strongest activity in the first half of the year. During 2016, developers pulled approximately 18,600 single-family permits and more than 9,400 multifamily permits.
Residential land sales spiked in the first six months of 2016, but land prices dipped in the second half of the year. Overall, the median price in 2016 was up more than 30 percent from the median figure of 2015. Sales of land parcels for residential use were up more than 55 percent in the second half of the year over the first six months. The surge caused total transaction activity in 2016 to outpace 2015 by five percent.
Greater Phoenix home prices have risen at a steady pace and, according to the S&P/Case Shiller Home price index, they rose 5.2 percent year over year through November 2016. The median new home sales price in 2016 was $301,000.
Multifamily activity remained strong in 2016, although vacancy did elevate in the final months of the year. Multifamily vacancy closed the year at six percent and is anticipated to rise further in 2017. Permitting for multifamily is forecasted to slow by approximately 30 percent in 2017 after several years of robust construction.
Land sales for commercial uses dipped by 19 percent in the second half of 2016. The median price for commercial use land in 2016 was $4.08 per square foot, down 11 percent from the 2015 median price. The commercial real estate market improved in 2016 with vacancies trending lower and rents rising. New spec development has been modest, but there have been large build-to-suit projects in both the office and industrial sectors.
Greater Phoenix is expected to post continued gains in land market activity throughout 2017. Much of the new demand for housing has been filled by high-end multifamily developments. This trend is expected to decline in years ahead and there is an anticipated acceleration in single-family permitting. Interest rates rose at the end of 2016 and are likely to rise again in 2017. The market will cautiously evaluate the possible impact this will have for renters considering a transition into home ownership.