March 27 – Single family permits are not growing as fast as home sales. In February the 12 month count rose to 18,551 for Maricopa and Pinal Counties combined. This compares with 18,491 in January, a very modest 0.3% increase month to month. In February 2016, the 12 month count was 17,512, so the annual increase is currently running at 5.9%. Not only is the annual growth much slower than the rate of closings, the rate of growth is slowing down. Between January and February 2016 the month to month change in the 12 month count was 2.2%, which is nearly 7 times faster growth than we are seeing this year.
We are not seeing new homes planned at the rate necessary to meet the current increase in demand. This suggests that supply will continue to tighten, lead times will lengthen and prices will have to rise. Underlying causes are builders struggling to maintain profit margins in the face of stubbornly high land costs and scarce skilled labor which is growing ever more expensive. Government actions to drive immigrant labor out of the country will probably make the labor shortage more acute and new homes harder to find. However it will shrink re-sale and rental housing demand a little since that labor force will no longer need somewhere to live in Arizona.