A Phoenix home with 95 bids is just one example of a housing market entering a new and unprecedented phase. Experts with Arizona State University's W.P. Carey School of Business say the city is heading for a significant housing shortage.
Long gone are the days when the Phoenix metro was riddled with available, well-built single-family homes in the wake of the 2008 housing market bust.
Five years after the crash, the desert metro is facing lagging home construction, predictions of population growth and rising land prices, according to real estate experts with ASU.
The end result could be a significant housing shortage in the near future, experts contend.
During a forum titled the ‘Phoenix Housing Market Explained’, ASU real estate analysts gave a contrasting view to the long-held belief that Phoenix real estate is booming from all angles. (An online video of the forum discussion is now available at ASU's knowre real estate website).
"After five years of very low construction volumes, we don't have enough homes to match the rate of population increase," said Mike Orr, director of ASU’s Center for Real Estate Theory and Practice.
Arizona may have had plenty of distressed and never-used inventory after the market slowdown a few years ago, but times have changed and demand and demographic shifts could create an even tighter inventory shortage, they warned.
ASU experts attending the forum said Phoenix already has less than half its normal supply of homes for sale and active listings for houses under the $200,000-range have fallen 74% since January 2011.
Home construction has picked up a bit, but not enough to meet the projected future demand, ASU panelists said.
Making matters worse is the expected population growth of 2.6 million people by 2040.
"To accommodate our future growth, we have to build the equivalent of an infrastructure sufficient to support metropolitan population of Denver," said Mark Stapp, director of the Master of Science in Real Estate Development. "That’s pretty unbelievable."
Stapp says the recession and foreclosures – along with credit issues – pushed new home construction down, reducing new home inventory in Phoenix. But now, land prices in desirable areas of the metro are extremely high, costing $100,000 or more per acre, based on ASU research.
Until existing home prices rise significantly, Stapp does not see homebuilders easily justifying a significant increase in volume production.
There’s also a construction labor shortage, the panelists argued. Having less labor and higher land prices is a poor combination for incentivizing builders.
"So we have a long-term chronic supply shortage of housing until the construction industry can grow to its former size in 2000," Orr said. "And they are not obligated to build the homes that we need. They are commercial operations, right? They build homes when they can make a profit."