Tariffs, Interest Rate Hikes and Lagging Work Force…is Arizona’s Real Estate Market ripe for the per
Arizona home buyers know all too well that a hot housing market can be a sign of trouble ahead.
In an article written by Paige Phelps – Senior Producer for “The Show” titled “Is A Perfect Storm Headed For Arizona's Booming Real Estate Industry”, she talks about what could be the perfect storm and how home buyers may want to “Get in before it’s to late”.
“While job numbers and housing starts are currently skyrocketing, there are signs a perfect storm is brewing on the economic horizon.
Arizona's last jobs report featured an unemployment rate at 4.7 percent, a strong number buoyed by the construction sector: it added 2,500 construction jobs in May alone — that’s a 9.1 percent construction employment year-to-year change.
"We’re looking at residential permits for single-family is up 11 percent. And of course, those are just permitted, that’s not counting what’s already been built, that’s just what’s being planned," said Tina Tamboer, a real estate analyst with the Cromford Report.
The sector’s growth seems rosy, but there’s trouble ahead. The Trump administration’s tariffs have put Canadian lumber, aluminum and steel in the line of fire — all materials vital to the construction industry.
"Whether it’s soft lumber, or it’s manufactured goods: hardware for sinks, you know, quartz counter-tops, it really doesn’t matter. If we’re importing the goods, the costs are going to go up and I would anticipate housing prices to respond accordingly," said Jim Belfiore, who runs Belfiore Real Estate Consulting, a market research firm.
Add to that sweeping enforcement of immigration policy and a lack of skilled workers — it’s taken its toll. Belfiore said lack of able bodies on the job site has been a top concern for years — and that’s not just for new homes, but remodeling older ones, too.
"At the end of the day, what it means is raising the wages of people in those trades, so if you’re a roofer today you should feel really good about the likelihood of you getting a raise tomorrow because builders need you today, but they’re gonna need you a lot more in the future," said Belfiore.
So even if you’re not in the market for a new build, if you’re living within four walls, Belfiore says you still better pay attention.
"Whether it’s a resale house or a new house, it really doesn’t matter. You’re going to get a double whammy if you’re a home buyer, you’re going to pay a higher price for the same house you would’ve purchased before," he said.
So in terms of builders, are they worried about manpower? Or are they worried about tariffs?
"I think they’re worried about both, manpower and tariffs. I mean, the cost of construction been going up already before the tariffs came along," Tamboer said. "We’ve gone through a long period of time without building very much, either on multi-family or single-family so there’s a lot of pent-up demand for supply that we just don’t have right now. So I don’t think it’s going to be very good to have both an increase in labor costs and increase in tariffs for the housing industry. I think that builders are going to be forced to make some decisions; they’re going to have to lower the quality or they’re going to build smaller homes."
And there’s one more factor house hunters are going to have to take into consideration.
“As I mentioned, today we took another step in gradually scaling back monetary policy accommodation," said Federal Reserve Chair Jerome Powell, announcing an interest rate hike a quarter percent.
And while not directly attached to mortgages, this announcement, said Belfiore, "will drive up monthly payments."
But there’s an interesting twist here. Despite these three big factors: interest rates, tariffs and lack of skilled workers, any of which on their own could dampen a hot market, Tamboer and Belfiore say there are no signs of the industry slowing down — at least not when it comes to price. Not yet anyway. And that includes momentum for house hunters.
Local Payson and Rim Country Arizona Broker Cliff Potts with Berkshire Hathaway Homeservices Advantage Realty also suggest now may be the time to look for that perfect property and make your dreams come true before Rim Country Real Estate is less affordable. In August of 2017 the average list price for a home was $390,573. One year later that figure has risen to $411,450 an almost 9% increase over 12 months. In August of 2017 the average sale price was $258,022. Potts said, “the average is increasing very rapidly” and now in August of 2018 it is at $272,586. That marks an 8.5% increase in 12 months.
It is yet to be seen if the perfect storm is on the horizon. Experts are saying that it is not showing signs of slowing down. Potts says, “as long as the economy remains strong, the price of housing is going to increase, due to demand and the increased cost of construction”. So now may be the best time to get in before it’s to late.
Experts of this article were taken from an article written by: Paige Phelps – Senior Producer – The Show Published: Wednesday, July 11, 2018 - 8:18am Updated: Thursday, August 23, 2018 - 3:39pm
For more information about the Local Payson and Rim Country area in Arizona contact us.
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