Market Update August 26th, 2024

The rebound of single-family building permits in Maricopa and Pinal counties in 2024 represents a significant recovery in the construction sector. As of July, there have been 18,498 new single-family units authorized, marking an increase of over 40% compared to the same period in 2023. Despite this growth, these numbers still do not reach the peak years of 2021 and 2022, where permit counts were 21,796 and 19,748, respectively. This surge indicates a renewed confidence among developers, though it’s interesting to note that this increase hasn't extended to the re-sale market, which has seen a 4% decline in closing volumes year-to-date compared to last year, illustrating a peculiar disconnect between new home constructions and re-sales.

The optimism of homebuilders is further bolstered by economic factors such as the Federal Reserve's reduced interest rates. This financial environment has buoyed the spirits of investors and builders alike, with many publicly traded development companies experiencing all-time highs in their stock values recently. The positive trends in new home permits reflect a broader confidence in the real estate market, potentially spurred by these lower borrowing costs.

A detailed look at the distribution of these new permits across Arizona shows a notable variation in regional growth. Maricopa County saw a 39% rise in permits, while Pinal County recorded a 43% increase. Other counties combined for a 38% upturn. The leading areas for new permits include unincorporated Pinal County, Phoenix, and Surprise, demonstrating a shift in development focus compared to the top cities in the re-sale market, such as Mesa, Glendale, and Scottsdale, which did not rank in the top ten for new constructions. This geographical shift underscores evolving market dynamics and preferences in residential development locations.

Lastly, the county administration's handling of areas like San Tan Valley, which has yet to incorporate, reveals the complexities of urban planning in rapidly growing regions. Florence, for example, is issuing more permits than traditionally faster-growing areas like Gilbert and is on pace to surpass Scottsdale. The upcoming vote on whether San Tan Valley should incorporate reflects a critical moment that could reshape administrative oversight and infrastructure development in one of Arizona’s fastest-expanding areas. This scenario underscores the ongoing evolution and challenges within Arizona's real estate and urban development landscape.

As we enter into September it is a big month for economic reports. The Federal Reserve might be put in a position to make a rate cut, which will sure affect the markets one way or another. If this starts to put pressure on the 10-year Treasury Yield, we may see mortgage rates start to head even closer to 6%. We will just have to wait and see!

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Have a great week everyone!