home construction

Home construction in Lake Havasu City is up as home and land values rise.

Housing prices have been steadily increasing for several years in the wake of the Great Recession — which was fueled by the housing bubble that burst around 2007 and 2008.

But during the pandemic housing prices have begun to skyrocket throughout the country.

According to CoreLogic’s nationwide home price index, home values have increased by 17.2% in June 2021 compared to June 2020.

Arizona has been ahead of the curve with a 26.1% increase in home prices in June 2021 from the previous year, making it the second fastest home price growth in the county behind Idaho’s 34.2% growth in the same time period.

The Lake Havasu City-Kingman statistical area — which includes all of Mohave County – has seen home prices grow even a little quicker than the state average with a 27% increase from June 2020 to June 2021 according to CoreLogic.

“Housing prices had been pretty flat for a while. It took a long time after the housing bubble collapsed in 2007-08 for prices to recover,” said Alex Schwartz, Professor of Public and Urban Policy at The New School in New York. “Obviously it varies by region and market, but they were going up more slowly. In the last two years they have really picked up steam. The most recent year over year change was the largest since 1979 – which is a long time.”

Although housing costs are increasing quickly, real estate and economics experts say the rapid increase in home prices nationally is a direct result of the markets current fundamentals of supply and demand.

“Housing prices are rising at a very high rate because housing demand is currently very strong, and it is facing a weak supply of homes for sale,” said Luis Torres, a research economist with Texas A&M University’s Texas Real Estate Research Center. “So that is basically pushing up housing prices at a very high rate.”


One of the largest factors contributing to the current national housing crisis, according to experts, is the number of new homes that have been built in the last 10 years or so.

“It has always been an issue, especially new home construction was lagging behind after the Great Recession, even before the pandemic hit the economy,” said Torres. “In Arizona it lagged behind because it was hit hardest by the housing boom and housing bust – home builders never came back to building at the same pace as they were before the Great Recession.”

According to analysis by mortgage-finance company Freddie Mac in April, the U.S. housing market is 3.8 million single-family homes short of meeting demand. Torres said the exact number of single family homes needed to meet nationwide demand varies somewhat depending on the organization making the estimates, but he said there is widespread agreement that the current supply is not enough.

“We have an underbuilt housing market over the last decade,” CoreLogic’s Chief Economist Frank Nothaft said. “That is one of the reasons we have seen vacancy rates come down to a generational low. That is what we are experiencing in markets all around the US right now.”

According to data from the U.S. Census’ housing survey, the homeowner vacancy rate was 0.9% in the second and third quarters of 2020, and has been at 0.9% again during the first two quarters of 2021. Prior to 2020 the last time the homeowner vacancy rate in the U.S. was 0.9% was during the second quarter of 1978.

Nothaft said new residential construction has seen an uptick recently with more single family homes being built, and more single family homes selling so far in 2021 than there were during the same time period in 2020.

“Single family home construction is up, but it is not up enough to address the underbuilt housing stock and the new homes that are being built generally come with a big price tag,” Nothaft said.

Nothaft said there are several reasons that new construction is generally more expensive right now. For one thing, the price of lumber more than doubled during the pandemic – although those prices have recently started to drift back down into a more reasonable range.

“There are a lot of materials that go into building a house, but perhaps the most important one for a single family house is lumber,” Nothaft said. “Lumber costs have more than doubled over the last year. The rise in lumber costs for the average single family home in the US adds probably $20,000 to the price tag relative to a year ago. So that just makes it that much more challenging for homebuilders to build homes for first time buyers, lower income prospective buyers, and housing that meets the needs of workforce housing. It is hard to build and deliver that when your building cost has gone up as much as it has.”

Since 2012 the price of lumber according to Nasdaq has bounced between $210 and $500 for 1,000 board feet of wood. But during the pandemic the price skyrocketed due to its own supply and demand issues, reaching as high as $1,670.5 in early May. Those prices have been dropping steadily since May, however and closed opened on Aug. 30 at $520.90.

Another major contributor to overall building costs is labor. Nothaft said the pandemic has also played a role there.

“Some of the additional covid protocols that builders have had to put in place on the worksite has lengthened the time to complete and deliver a home – that just adds to the labor cost that goes into the home,” he said. “Then in some jurisdictions there have been some delays in scheduling inspectors to come out to the work site because of the pandemic. So there has definitely been a lengthening of the time to deliver a new home from the initial start to completion – and as you know time is money, so it is all added to the price tag.”

Most of the houses that hit the market are existing homes rather than new construction, but Nothaft said the pandemic has slowed down those homes coming to the market as well.

He said the median homeowner in the U.S. is 57 years old, which means that about half of all owner occupants are Baby Boomers or older.

“Of course during the pandemic all of the health experts said the older population was at far greater risk of serious infection or death,” he said. “So if you are an older homeowner maybe you were planning on selling your home in 2020 or in 2021, and yet we have this crazy pandemic going. If you have flexibility in how you time your sale, why not wait until after the pandemic is over? That is what a lot of older home owners decided to do.”


While the supply of homes has been slow for several years, the covid pandemic appears to have contributed to a massive increase in demand for housing in markets throughout the country.

A primary factor in the increase in demand, according to Nothaft, Torres, and Schwartz is the extremely low mortgage rates that have been in place for the past year.

“We have had 30-year fixed rate mortgages at or below 3% for the last 12 months,” Nothaft said. “Never in the history of the United States have we had mortgage rates that low – I even looked back during the Great Depression and mortgage rates were higher than they are today. So that is fueling the demand by prospective homebuyers – they see this opportunity that has never happened before in the U.S.”

While millions of people were laid off, were forced to close their business, or experienced other financial difficulties during the pandemic, that was not a universal experience. Torres said many people were largely unaffected by the pandemic because they work in industries that are able to easily socially distance. Typically, those are people with higher education levels, and higher incomes.

Schwartz noted that those families even realized some forced savings during parts of the pandemic when there weren’t as many avenues for consumption, leaving them more available capital for purchasing a house.

“They had income, they didn’t lose their jobs, and they had saved up a nest egg,” Torres said. “So the rock bottom mortgage rates were a trigger for them to come into the marketplace.”

But as prospective homebuyers have entered the market during the pandemic, Nothaft said they have tended to move away from multi-family high rises in dense urban areas and to lower density neighborhoods in the suburbs or rural areas.

“That is one of the unique features of this pandemic,” Nothaft said. “Suddenly families revealed a strong preference for single family detached homes because they needed more living space inside their home. They needed the office from home and in many cases they needed the classroom from home.

“In addition, they wanted social distancing from their neighbor. Single family detached homes, especially single family detached homes at the edge of the urban market or in more rural communities give you tons of social distancing from neighbors… That is a trend we saw play out during the pandemic, pretty much throughout the entire United States.”


Torres said there were some worries that the moratorium on evictions could hit the rental market hard during the pandemic, but those fears have not come to pass on a national scale. He said when someone is priced out of home ownership they turn to rentals – which has increased demand.

“The rental market has benefited by the overheating of the house market,” Torres said. “Those high prices in the home market are causing people to say, ‘Unfortunately I am not going to be buy a starter home and make that movement from renting to owning a home, so I’m going to have to stay at my apartment, or maybe try to rent a house.’ All that has driven up prices. So what we are seeing is all residential – home prices for sales, rents for apartments and rents for single family homes – are all increasing at a very high rate. The whole residential market is doing great right now.”

According to the U.S. Census Bureau’s population survey the rental vacancy rate is currently 6.2%, which is the lowest rates have been since they dipped to 5.7% in the second quarter of 2020 during the height of stay at home orders and lockdowns nationwide. The rental vacancy rate over the past year is the lowest it has been nationwide since 1984-85.

Workforce housing woes

The rapid rise in home values is good news to many.

“For existing homeowners the home prices have been a boon,” Nothaft said. “It has really created a lot of home equity wealth.”

But for others it has also priced many out of the market completely.

“When you have rapidly rising prices, it takes more and more of the housing market out of the reach of working families – people with more modest means. In order to get a mortgage you need a down payment – let’s say 10% of the purchase price,” Schwartz said. “Obviously the higher the price, the bigger the down payment you need. Having the savings for that down payment is, in most cases, the biggest hurdle to home ownership.”

Schwartz said even with a down payment, the mortgage payments themselves are now higher causing fewer people to qualify. And if values continue to climb, property taxes could increase as well, further adding to homeownership costs.

“It just makes it harder to afford the housing,” he said.

Another housing bubble?

High home prices in 2008 turned out to be a mirage when the housing bubble burst and 10 million single family homeowners lost their home to a foreclosure or short sale. But experts say the situation today is completely different, and unlikely to be a bubble.

The housing bubble in 2008 was created in large part due to questionable lending practices that awarded large loans without proper documentation of any income or assets that could be used to pay off that loan.

“The underlying factors behind the housing crisis then had to do with the availability of easy money,” Schwartz said. “People were able to borrow large amounts with very little scrutiny. They were borrowing more than they could afford and they were taking high-risk mortgages. It was unsustainable because as soon as house prices started to stabilize or go down, foreclosures began and the whole market collapsed. That is not the situation here. This is really based on fundamentals of the housing market – based on the supply of housing and the income and savings of the buyers, as well as the fact that interest rates are very low.”

Schwartz, Nothaft and Torres all said such lax lending practices have been eliminated over the last 15 years.

Nothaft said 15 years ago housing was also significantly overbuilt, but today it is considered underbuilt by millions of homes.

“Vacancy rates were high and rising,” he said. “Today it is exactly the opposite – we have a generational low in vacancy rates. When you have an overbuilt housing market and prices are rising then the prices are not tied to the fundamentals because you have a large oversupply of housing. That contributes to the bubble popping. Today we have got an underbuilt housing market, but people have still got to live somewhere.”

By and large, it appears that people paying top dollar for homes in the current market are able to afford it.

“This is really based on fundamentals of the housing market – based on the supply of housing and the income and savings of the buyers, as well as the fact that interest rates are very low,” Schwartz said.

Future forecast

Nothaft and Torres said home values can’t continue to increase at the rapid rate they have over the past 12 months forever, and they expect the market to start to start to stabilize soon.

They both said they expect mortgage rates to rise from their current historically low levels. Nothaft said CoreLogic is expecting a 0.5% increase in mortgage rates in the next year.

Torres said high mortgage rates will lead to higher monthly payments and affect affordability. Coupled with the increasing price of homes will decrease demand as fewer people are able to afford them. Nothaft said he is hopeful that the current covid pandemic will wane in the coming months as well, which could lead to an increase in homes hitting the market.

“Maybe I’ve got my fingers crossed and am being hopeful, but I really do think the pandemic will be in the rearview mirror by the time we get to the spring of 2022,” Nothaft said. “We will be past the worst of it. Hopefully we have reached herd immunity or whatever you want to call it by then. So those older homeowners who have been sitting, saying they want to sell but not during the pandemic, I think they will bring those homes onto the market and list them for sale in the spring and summer of 2022.

“So we’ve got kind of a reversal of some of the conditions of the last year. We have a lessening of demand and an increase in inventory for sale that work to moderate home price growth in 2022. It is not going to be immediate.”

But Torres says even as home prices moderate, nationwide affordability will continue to be an issue. He said moderation doesn’t mean home prices will drop back down to where they were, but rather their value will return to more typical pre-pandemic annual gains in the low or mid-single digits. CoreLogic is projecting home values to increase 3.2% nationally from June 2021 to June 2022.

“Affordability is going to continue to be an issue. The idea of trying to purchase a home is going to get difficult because it is difficult because it is difficult for prices to go down,” Torres said. “Right now there is a 30% annual growth rate in Austin [Texas] – that is unsustainable and I’m saying it is going to go back to 5%. But the issue is you have reached those levels. The median home price, and all those home prices are now higher. So it makes it more difficult for people to move from being a renter to purchasing a starter home.”


(22) comments


We get your message Herald news, move on!


I'm curious as to if the LHC realtors are disclosing the fact that the lake may be gone in 3-5 years due to the drought. We are at code red already,with 25% reduction in water coming soon. No one will want to visit/buy in "Havasu City". The lake is what keeps this town alive.


When the walls come tumblin' down

When the walls come crumblin' crumblin'

When the walls come tumblin' tumblin' down

We will all cry and wonder why.


BigBob. Why don't tell all of us just what happened to your profile page for 10 days. Did the editor slap you with a period of 'no comments allowed'. I see you aren't doing a whole lot of nasty name calling. Did that do you in with the comment cop?


How about it Bozo. You care to answer my question or are you to embarrassed to. Tell us how you survived not being able to insult people for 10 days.


nl - One more time - WHO is this "Bozo" person you keep whining about? Is it truly just a little voice in your head?


Gee little bobby the village idiot does not know who Bozo is yet he reacts to the post.....

Too old for this

He, 502 and HG were "holed" up in a local motel.


The liberals like BigBob are rooting for failure but I got news for ya. Your liberal Governor to the west is going to keep the prices here as high as a kite unless he is recalled which looks probable. Either way you co.e out as the looser so this is funny as all get up! LOL...


doggie - Curious how you do not know me and yet you claim I am "rooting for failure." Always amazing how people attribute things to me that are so far from the truth it is laughable, but that's your opinion and as warped as it you are welcome to it. I am curios as to how Governor Newsome is responsible for "prices here" being "as high as a kite," exactly what influence does he have over the Havasu economy? I hesitate to ask what "co.e" means and why I am "looser" - than what? But again you make little sense so there it is.


Funny how the Taliban Trump crowd always throws out the same old liberal arrow. It is always easy to sit in the cheap seats and complain. California people with money buy what they want and where. Have you noticed the newer developments look like newer city areas. These areas like the Foothills are higher end homes and much nicer neighborhood. Home prices in Havasu are driven by market condition and who is coming to town. The old Havasu chain link fence neighborhoods are a eye sore.. California people do not want to have a vacation home in a area with junk all over the yards.

Too old for this

You are welcome to go back to CA, or Scottsdale, any time you want to. Why not call a mover today?

Too old for this

You moved here, didn't you?



Too old for this

It was nice not having you around for the past couple of weeks. I can see that you are back and have saved up a lot of degrading insults for those of us who have opinions.

Before picking on him for his spelling errors, you should learn to spell curious the correct way. There is a "u" in the word.


twosie - Good for you! Once again you have caught the Easter Egg I provided just to make certain you're reading what I post. And thank you for being so tolerant of my opinions - hypocrite.


Once again your Easter egg is actually just plain old fat finger typo.


Havasu inventory tripled since May. Price reductions all over town. This time next year prices will be 15 to 20% down and inventory up.


Hahah!! I'm thinking not.


ovur - You're record when it comes to "thinking" is overall abysmal.


That's more than can be said of you Bozo.

Too old for this

Ask any realtor and you will find out how wrong you are, 502.

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