Homebuilding increased to its highest level since June 2007 this August, according to data from the U.S. Census Bureau.
The jump is a positive sign for the housing industry, which had failed to see significant increases in single-family home construction this year. Housing starts — that is, new residential construction projects — increased by 12.3 percent month-over-month to reach an annual pace of 1.364 million.
This figure widely eclipsed the forecasts of economists surveyed by the Wall Street Journal, who predicted a 4.1 percent monthly increase for an adjusted annual rate of 1.24 million.
Arizona, specifically, had a significant jump in homebuilding, as well. Between June and July, contracts for over 2,100 homes were signed, which represents a 19 percent increase over the same period last year.
“It’s a result of the low inventory market we have. On average, in the Phoenix area, we’re at about two months worth of inventory, so if nothing else came back in the market and we continued to sell at our current pace, we would sell out of every home we have available in two months,” said Patrick Lewis, president of the Arizona Association of REALTORS. “We consider six months a balanced market. Right now, we have more homes under contract than we have that are available to sell. That’s when homebuilders will come in and help increase inventory a little bit and really bring relief to that.”
Lewis explains that the rise in homebuilding is beneficial for sellers in Arizona. Because demand is so high, sellers can list their homes for higher prices, and as more people continue to flock to the state, the demand for housing will only increase.
Multi-unit housing starts largely carried the growth of residential projects, as homes with 5 units or more increased by 30.9 percent month-over-month. Single-family homes, on the other hand, grew by just 4.4 percent.
“Really, what we’re seeing a big uptick in right now is more to affordability,” Lewis said. “We’re definitely seeing a strong condo market right now. Single-family [housing] also continues to be strong. But because of some of the affordability and low inventory issues, we continue to see condos making a stronger push.”
In the wake of mounting discussions about a global recession, the state’s housing market is thriving, Lewis says. While other states’ real estate scenes are slowing down, Arizona continues to be a strong market. In fact, the University of Arizona anticipates the construction of 9,000 apartment units every year between 2018 and 2030, which is projected to generate $1.1 billion in construction activity and over 14,000 jobs annually.
“If you’re buying right now, especially under $500,000, it definitely feels like a frenzy market, but it also means that while there’s a lot of talk of economic slowdown and recession and other parts of the country [that] are starting to see a bit of a slow in their real estate growth, we continue to be a strong market,” Lewis says. “Worst case scenario, should we see a little bit of a pullback, we may see a bit of a downward pressure on prices across the board. But with the amount of demand we have and the lack of inventory we have, we would kind of see that coming.”
In the next 12 months, Lewis anticipates a slight slowdown in homebuilding, but nothing too drastic. By law of averages, he says, the real estate market will teeter towards the buyers’ side. However, because of the state’s rapid economic growth and job production, the state will likely be in a situation similar to the present.
Regardless of market shifts, Lewis stresses the importance of contacting a realtor when buying or selling a home.
“One of the best resources for a lot of this information is for [buyers] to talk to a local professional realtor,” Lewis said. “They’re going to be the ones that are more adept and knowledgeable about the market and will be able to really interpret those statistics so that those customers can really decide if it’s a good time to buy for them, if they should wait, what type of home — all of those types of things.”
This story was originally published at Chamber Business News.