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TEMPE, Ariz. (Nov. 5, 2013) — The government shutdown may have dampened interest in buying Phoenix-area homes this fall. A new report from the W. P. Carey School of Business at Arizona State University shows the latest data for Maricopa and Pinal counties, as of September:
Phoenix-area home prices have been rising since hitting a low point in September 2011. The median single-family-home price rose 32.7 percent -- from $150,000 to $199,000 –from last September to this September. Realtors will note the average price per square foot went up 22 percent. The median townhouse/condo price went up 30 percent, to $117,000. However, the price gains are expected to slow down.
“Since the beginning of July, the Phoenix-area housing market has cooled dramatically,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “The main change is a steep fall in demand, which we can see in the 12-percent drop in single-family-home sales activity just between August and September alone. Going forward, we anticipate a much slower rate of price appreciation than the furious pace we have witnessed over the last two years.”
Orr says the recent government shutdown may be at least partly to blame for the hard brakes on the housing market.
“The sudden weakness in owner-occupier demand since July is unusual and unexpected,” says Orr. “Poor consumer sentiment and concern over the government shutdown seem to have accelerated the decline. We also have no government information available yet on new-construction permits because of the shutdown.”
On the positive side, the number of available homes for sale continues to rise, after the area experienced a very tight supply for months. Active listings, not including those already under contract, went up 32 percent from Oct. 1 of last year to Oct. 1 of this year. More people appear willing to put their homes up for sale as prices rise.
“If the current trend continues, supply will exceed demand by the end of the year,” says Orr. “We now expect a balanced market to prevail during November. This is great news for buyers since they will experience less competition and be in a strong position to negotiate.”
The luxury market continues to perform well, thanks to the rising stock market and a big increase in the availability of jumbo loans. Sales of $500,000-plus, single-family homes grew an incredible 51 percent from September 2012 to September 2013.
However, cheap homes are tough to find, with fewer foreclosures coming onto the market. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – dropped 61 percent from last September to this September. Completed foreclosures declined 63 percent. Orr expects foreclosures to keep falling over the next several years, thanks to tight underwriting standards.
Institutional investors and out-of-state buyers continue to lose interest in the Phoenix area, since better bargains can now be found elsewhere. The percentage of homes and condos bought by investors in September was down to 22.7 percent, from the peak of 39.7 percent in July 2012. Also, the percentage of Maricopa County residences sold to owners from outside Arizona was only 16.4 percent, the lowest percentage since January 2009.
Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed and downloaded at www.wpcarey.asu.edu/realtyreports. A podcast with more analysis from Orr is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.
W. P. CAREY SCHOOL OF BUSINESS
The W. P. Carey School of Business at Arizona State University is one of the top-ranked and largest business schools in the United States. The school is internationally regarded for its research productivity and its distinguished faculty members, including a Nobel Prize winner. Students come from about 100 countries and include more than 50 National Merit Scholars. For more information, please visit wpcarey.asu.edu and http://knowwpcarey.com.