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After several years of wild roller-coaster activity, the Phoenix-area housing market is ready to end a relatively flat year. That’s according to the latest monthly report from the W. P. Carey School of Business at Arizona State University. Here are the highlights of the new report on Maricopa and Pinal counties, as of October:
After the housing crash, Phoenix-area home prices shot up from September 2011 to summer 2013. Then, the median single-family-home price rose just 4 percent more – from $200,000 to $208,000 – from last October to this October. Realtors will note the average price per square foot also went up 4 percent. The median townhome/condo sales price rose only 2 percent.
“We’ve seen very little change in the Greater Phoenix housing market for the last year, and stability is the order of the day,” 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. “Price increases look tame over the last 12 months and even tamer if you examine just the last six months. There is no longer any real upward price momentum greater than the general level of inflation.”
Orr’s report notes that demand in the market remains lower than last year. In fact, the amount of single-family-home sales dropped 5 percent from last October to this October. Activity from first-time home buyers has been unusually low, in part because some people had their credit badly damaged during the recession and also because millennials are waiting to enter the home market until later in life than previous generations. These are also reasons the rental market is strong. Rents have increased 3.7 percent over the last 12 months in the Phoenix area.
Meantime, Valley foreclosures have dropped way down over the past year. Completed foreclosures of single-family and condo homes were down 19 percent from last October to this October. The lack of cheap foreclosures here has been largely driving investors to other areas of the country, where bargains are more plentiful. However, there was a little bump back up between this September and October. The percentage of residential properties bought by investors hit 15.5 percent, the highest level since May, but still well below last year’s levels.
“Investors and out-of-state buyers are showing a small recovery in buying interest, but to get our market back to what we would consider normal will still require a major increase in demand from local first-time home buyers,” explains Orr.
Some expect the coming introduction of conventional home loans with lower, 3-percent down payments next year to stimulate more interest, but Orr isn’t sure this will make a major dent. He anticipates small, incremental improvements.
“The big economic gains of the last few years have helped companies, but not necessarily the average person who might consider taking out a home loan,” says Orr.
One other note from Orr: The market share for new-home sales is doing better and has recovered to 14 percent – the same level as October 2013. Taylor Morrison, Pulte Homes and Meritage Homes are leading the way in the Phoenix area.
Those wanting more Valley housing data can subscribe to Orr’s monthly reports at www.wpcarey.asu.edu/realtyreports. The premium site includes statistics, charts, graphs and the ability to focus in on specific aspects of the market. More analysis is also available at the W. P. Carey School of Business “Research and Ideas” website at http://research.wpcarey.asu.edu.
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 about 50 National Merit Scholars. For more information, please visit wpcarey.asu.edu and http://research.wpcarey.asu.edu.