The pace of land sales in Greater Phoenix has picked up during the first half of 2017, fueled by demand for housing and strong fundamentals in the commercial development industry. This is according to a mid-year report produced by Colliers International in Greater Phoenix. You can read the entire report by clicking Here.
The Greater Phoenix housing market has been improving at a healthy pace with single-family home construction gaining momentum and prices for new homes trending higher. Permitting for single-family units rose during the first six months of 2017, while multifamily housing development slowed. Approximately 22,000 single-family permits are forecast to be issued in 2017 and approximately 7,000 multifamily permits are expected.
Home prices in both the new and existing categories are on the rise, continuing gains that have been recorded during the past 36 months. The area’s price increases mirror the national rate at approximately 5.7 percent year over year through May (S&P/Case Shiller Home Price Index.) The median sales price for new homes sold in the first half of 2017 was $310,000, up three percent from the first half of 2016. The number of new homes sold in the first six months is up more than 25 percent from the same period last year.
Land sales accelerated during the first half and are expected to continue increasing. Sales of land for commercial and industrial development posted the strongest increases and pricing trends have been mixed. Property fundamentals in commercial real estate are improving, which prompts new development. Strong tenant demand for both industrial and office properties is driving spec construction in these sectors, while retail development will be modest in 2017.
The price of land rose during the first half of the year with the median price reaching $4.10 per square foot. This is up 12 percent from the median price in 2016. Price gains were strongest for parcels intended for commercial and industrial uses.
Sales of land parcels intended for residential development accounted for more than half of the total land transactions thus far this year. Land sales for residential uses are off to the fastest start since 2013. Prices for residential development land have trended lower because the market shifted towards more suburban parcels from infill transactions. The median price during the first six months was $2.72 per square foot, down 12 percent from the 2016 median price.
The apartment market remained strong during the first half of 2017, though there was a modest vacancy increase during second quarter. Multifamily vacancy has averaged 5.8 percent since the beginning of 2015. Construction of new units is gaining momentum with approximately 3,300 units coming online during the first half of this year and another 12,000 units under construction.
Single family permitting rose nearly 20 percent from the second half of 2017 to the first half of 2017. More than 10,000 single-family permits were pulled in the first half, which marks the fastest pace in a decade. We expect this year to post the sixth annual increase in permits in the past seven years.
The Greater Phoenix land market is expected to remain active for the remainder of 2017 and an increase in development activity is anticipated. Demand for housing is increasing as a result of population growth. The area expanded by approximately 93,000 residents in 2016, posting the most robust growth of any county in the country. Population growth is expected to expand by more than 100,000 residents per year, further fueling demand for single-family and multifamily housing. Continued strength in the commercial market will motivate more land sales for development and expansion of business properties.