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Shifting demand: Top 10 metro Phoenix cities for new home closings

RL Brown is seeing a shift in new housing growth.

Based on his latest data of February new home escrow closings, the founder of RL Brown Housing Reports is seeing shifts in the geographic housing market and buyer preferences, based on what and where buyers are choosing to purchase housing and live.

Of the top 10 cities other than Phoenix — which is the largest city in the Valley and had the most new home closings in February — five are in the West Valley and four are in the East Valley.

Click through the gallery for a look at how other Valley cities ranked:

The West Valley power is clustered along the Loop 303 and Interstate 10, and the East Valley along Loop 202 and Interstate 10, he said.

“As this year progresses, we can expect to see more shifts in closings to both areas and to Pinal County, and those shifts are likely to be the case for many years in the future,” he said. “In many respects, 2020-21 will be looked back on as a transition time geographically for metro Phoenix housing and can be expected to foretell the pattern of new housing growth for years to come.”

The city of Maricopa made No. 11 on the list, a city being revived by developers planning huge master-planned communities, including Scottsdale-based El Dorado Holdings Inc.’s $1 billion, 1,500-acre residential project called Eagle Shadow, and Scottsdale-based Harvard Investments Inc.’s relaunching of a $150 million community called The Lakes at Rancho El Dorado.

Other cities in Pinal County also are showing signs of life, including San Tan Valley, which took the 14th spot on RL Brown‘s list of cities with the most new home closings, along with Florence (No. 14), Coolidge (No.17), Pinal County (No. 18) and Apache Junction (No. 19).

In February, RL Brown tracked 1,780 new home sale closings, up a bit from 1,497 in January.

“Year-to-date new homes are flat with 2020,” said Jim Daniel, president of RL Brown Housing Reports.

Looking at sales on the Arizona Regional Multiple Listing Service, existing home sales in February were up 5.6% from February 2020 and up 9% from January 2021, said Tina Tamboer, senior housing analyst for The Cromford Report.

On a side note, she said, February 2020 and February 2021 both had 20 working days, while January 2021 had 21 working days.

“If we compare February 2021 to January 2021 in terms of average closings per day in the MLS, February closings outperformed by 14.4%,” Tamboer said.

National picture

February home sales in metro Phoenix cast a far different picture from the nation, where new home sales plunged by more than 18% for February as worse than usual winter weather prevented many purchases across the country, said Ben Ayers, senior economist for Nationwide.

“Sales were down in all the major regions but the strongest losses were in the Midwest and South, where winter storms and cold weather were prevalent for the month,” Ayers said. “Even with this outsized decline, the level of sales at an annualized pace of 775,000 was 8.2% higher than the prior February.”

Nationwide, the dip is likely temporary, said Matthew Speakman, economist for Zillow Group Inc. (Nasdaq: Z)

“Materials prices have surged in recent months,” Speakman said. “Lumber prices were up 59% year-over-year in February, according to some measures, the largest annual jump since the 1940s. And these rising prices seem to be eating into otherwise unbridled homebuilder optimism.”

Even so, he said, spirits among builders remain high, and activity should remain strong in the months to come, but sentiment has fallen back from the record highs set a few months ago nationally.

“But many of these conditions — except volatility in materials price — have probably already passed, and a large share of homes for sale that have not yet been started suggests that while weather may have closed job sites for a time, it didn’t close sales centers,” Matthew said of the national picture. “And with the supply of existing homes for sale sitting at an all-time low, newly constructed homes remain an attractive option for the waves of home shoppers eyeing the market.”

So while sales activity may have paused somewhat in February nationwide, Speakman said he expects it to resume in coming months as the labor market improves, nationwide vaccine distributions continue and the shortage of available homes persists.

“New home sales remain well above pre-pandemic levels, and the good times are likely to continue to roll this spring and summer, despite a weak February,” he said.

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