Home construction and sales in Surprise may never return to the halcyon days of the early 2000s, but signs point to a market about to pop this year.
That was the message delivered by Mike Schwab, principal and designated broker for Scottsdale-based Land Advisors Organization, which primarily sells land and lots to developers.
Mr. Schwab’s area of specialization is in the West Valley. He gave an overview of the Surprise housing market to the city’s Planning and Zoning Commission at its meeting Jan. 19.
Surprise has led the Phoenix Metropolitan Statistical Area in population growth for much of the past two decades. In recent years, the city’s share of the market declined and was 3 percent of the MSA with 523 permits issued in 2016.
“That could change dramatically, because there are a whole bunch of projects under construction in Surprise right now,” Mr. Schwab said.
The Northwest Valley had 2,338 permits issued in 2016, about 13 percent of the permits issued in the Phoenix MSA. The West Valley accounted for 30 percent, and as housing conditions improve Mr. Schwab said the region should return to 45 percent of the market, as it was in the last decade.
The entire MSA saw 17,800 permits in 2016. Predictions of expert agencies consulted by Land Advisors for the market range from 19,500 to 22,500 permits in 2017.
“To give some perspective, in 2001-2004 you guys (Surprise) were permitting (about) 6,000 new home starts a year,” Mr. Schwab said. “A lot of that was driven by Sun City Grand. But even so, we’re at 10 percent of those numbers.”
When looking at current and future home construction and sales, Land Advisors breaks Surprise and some surrounding unincorporated land into three sections.
South Surprise is the heart of the city, from Bell Road south to Peoria Avenue and from Dysart Road to the edge of the White Tanks. This area has an inventory of:
• 395 lots available now in eight subdivisions (which are in the greater Marley Park, Surprise Farms and Greer Ranch master plans.
• 1,122 lots under construction with builders in 14 different subdivisions. In addition to the subdivisions selling now, developers are building in several neighborhoods of Zanjero Trails, and a small section of Sycamore Farms.
• A future inventory of 9,966 lots that are approved on paper and in wildly different stages of coming to fruition. (Included are developments like Magnolia and Prasada Lakes Village that have been under discussion lately).
“They’re going to come on line this year. They’re going to be delivering on product at the end of this year or next year. That activity should begin,” Mr. Schwab said in reference to Magnolia and Prasada Lakes Village.
North Surprise is the areas of the city north and west of the intersection of Grand Avenue and Loop 303. This area has an inventory of:
• 274 lots available right now. Almost all are in Asante and Desert Oasis.
• 872 lots in this area are under construction. This pending market includes Asante, Desert Oasis and the new North Copper Canyon development west of Grand and north of Deer Valley Road.
• 10,269 lots have been approved on paper.
This area looms as an even larger driver of growth in the next few years, Mr. Schwab said. But a lot of it will be quite different from the original concepts of these developments and more like Rancho Mercado and Tierra Verde, which are a decade or more old.
“You’re going to be grappling with PAD amendments because times have changed and products changed,” he said.
The median new home price in Surprise was $293,000 in 2016, up from $265,000 in 2015 and $242,000 in 2014, Mr. Schwab said. That is near the median for the entire Valley, which is hovering around $300,000.
For example, once viewed as a starter home development, Desert Oasis was as low as the $180s. He said now now the median home price there is $241,000.
Virtually uninhabited Western Surprise, straddling the Sun Valley Parkway figures to move dramatically in 2017, he said. A builder is likely to show up low-cost starter models — as was the case in Desert Oasis — in this area this year.
Commissioner Dennis Bash originally requested the report. Beyond the numbers, he asked for some clarity on what is driving the growth in the West Valley and the demographics of that growth market.
“Are we dealing with a lot of 55 and older retirement community people? Or are we looking at younger couples coming in that are hopefully going to drive a lot of growth in our area?” Mr. Bash asked.
Mr. Schwab said demographics are all over the board in Surprise. Typically, 10 percent of the total permits are in retiree communities though in the past Surprise has been closer to 20 percent, he said.
While Mr. Schwab said he will need to drill down further on the demographics of new homeowners in the city and Valley, he was more concrete on what is bringing another wave of people here.
“You’ve got folks that are realizing equity in their home, in California or the Midwest, and the home value in Arizona is very positive compared to other markets. Our job growth is higher than average. We’re also in the geographic smile blessed by good weather,” he said.