It’s no secret the housing market is hot—in nearly every area of the country. Home values are rising due to several factors, including low interest rates (now rising) and lack of inventory. Increased demand and lack of available homes have created a competitive, unpredictable market. It’s a complex environment for everyone involved, from builders and developers to home buyers and sellers.
How will this fast-paced market change in 2022 and beyond? Read on for a look at what’s driving demand, as well as how residential real estate developers are answering the call to create affordable, single-family housing throughout the country—especially in growing cities like Phoenix.
A Look Back: Residential Land Development Trends Over the Past 10 Years
The housing development industry has experienced significant growth over the last decade due to broad improvements in the U.S. economy. In addition, an accommodative borrowing environment with relatively low interest rates and increased access to credit has fueled consumer confidence when it comes to making significant purchases, like new homes. As a result, residential construction and homeownership have increased, with industry revenue increasing at a steady pace.
The statistics paint a picture of appreciation, driven by significant demand. But unfortunately, the numbers also show immense pressure put on developers:
- Real estate development industry revenue has increased at an annualized rate of 6.2% (to $172.6 billion) from 2016 to 2021.
- Existing-home sales rose 5.6% in 2020, but the number of homes for sale remains 48.5% below pre-pandemic levels.
- The market size of the housing development industry has grown just .4% per year (on average) between 2017 and 2022.
What’s driving the rise in demand for residential construction? For one thing, for-sale inventory is at historic lows. There’s also wild price growth in markets across the country, with median home prices rising 20% since last year. But is demand starting to cool?
What to Expect in Residential Land Development in 2022 and Beyond
It’s difficult to predict precisely how the residential real estate market will change in the next few years. However, there are several factors to consider, including increasing mortgage rates. Real estate experts expect rising interest rates will discourage consumers and developers alike from building new homes. It’s not all bad news for developers, though, as housing prices are projected to increase.
That said, there are certain factors that will increase the demand for single-family homes. First, families are moving from cities to suburbs and looking for single-family dwellings. Also, more Millennials are entering the homeownership phase of life, further spurring suburban growth. Finally, even macro trends like the shift to remote work have paved new inroads for homeownership, which is pushing the demand for new homes higher.
Check out these statistics for more insight into residential land development trends for 2022 and beyond:
- The average price of newly listed homes has climbed 13.5% since last year due to historically low inventory and increasing demand.
- The number of people looking for houses is going up while supply is going down, reflected by the fact that the national inventory of active listings decreased by 18.9%.
- The average number of days a home stays on the market has dropped to just 38, confirming greater demand and competition for houses post-pandemic.
- As of January 2022, the monthly supply of existing homes — a measurement of how many months the current inventory of available homes would last – dropped to 1.6 months, showing high demand and low supply.
Certain areas of the country will also see increased demand for homes—the Sun Belt in particular. People are relocating to sunny states like Arizona, with Phoenix slated to see significant real estate growth in the coming years.
How the Phoenix Housing Market is Impacting Residential Land Development Trends
The housing market in the greater Phoenix region is white-hot. Real estate investors are purchasing more homes in the area than in any of the other top 30 markets in the country. The reason? The average rent for a home in Phoenix is up by double digits, and there’s also a high price-to-rent ratio.
There’s a lot driving the increased demand for housing. For one thing, Phoenix residents enjoy a lower cost of living than they would in other major metro areas, especially in neighboring California. The great weather is another draw, as the area sees an average of 300 days of sunshine every year. In fact, Phoenix has been the fastest-growing city in the past ten years, with the metro area population growing by over 200,000 in the last decade alone.
It’s clear that Phoenix is growing, and the housing market is responding accordingly. The region is leading the nation in home price increases, with prices up 29.3% year-over-year. In part, the surging demand for homes is driven by buyers moving from urban apartments to suburban homes, not to mention real estate investor interest in single-family homes and other residential developments.
Phoenix is also a strong renter’s market, and investors are snapping up homes to take advantage. Real estate investors are buying more inventory in Phoenix than in any of the other top 30 markets in the nation. This, in turn, has driven home values in the area to increase by over 86% since 2016—likely as a response to the rapidly rising cost of rent. As of 2021, rent prices in Phoenix have increased at a staggering 19% year-over-year.
Developers are answering the demand for housing in the Phoenix area. As the region continues to see incredible population growth, Sandbox Development has recently played a leading role in getting three major residential developments off the ground: Heritage Crossing, Tortosa South, and Cypress Ridge. These large-scale developments include single-family residential and master-planned communities, and they’re loaded with amenities that growing families want, like swimming pools, picnic areas, exercise facilities, sustainable features, and more.
Real Estate Development Has Never Been More In-Demand
The Phoenix housing market shows no signs of slowing down as more and more people continue to move to the region. As a result, there’s a growing call for developers to create livable, affordable, and beautiful communities to accommodate this massive growth. Sandbox Development is leading the charge, consulting on highly attractive development projects and seeing them through to completion. Get updates on our latest projects by following us on our social pages, and keep checking our blog for more insights!