April 16, 2015

Buyers are back in Phoenix real estate market

TEMPE, Ariz. (April 16, 2015) — Demand in the Phoenix single-family housing market surged in February, and early numbers indicate that March got off to a good start. “We expect to be reporting even more impressive sales numbers when next month’s report is published,” said Michael Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business and author of the monthly housing report.

Single family sales rose 19 percent over January, which had turned out to be a disappointing month, and nine percent over February 2014. At the same time, supply — except in the upper price bracket — remains below normal.

“Activity is much higher than last year, and if it continues for a few more months, as seems likely, we will start to see significant upward pressure on pricing again,” Orr said. On the whole, he expects 2015 to be a much better year than 2014.

Highlights of the February report on Maricopa and Pinal counties:

  • The median price for a single-family home rose 2.2 percent compared to January, but at $212,500 it was nine percent above February 2014. The average price per square foot fell 0.8 percent compared to January but was up 3.1 percent at $130.48 year-over-year.
  • The median sales price for a townhouse/condo was up 3.6 percent in February compared to January, although the price per square foot fell 0.5 percent. Compared to February, 2014, however, this segment made stronger gains than single family. Year over year, the median price was up 10.7 percent at $139,900, and the average price per square foot was up 11.7 percent to $135.82
  • Supply continues to be low. Active listings, excluding homes under contract, fell 2 percent in February, in contrast to February 2014, when they increased four percent. An early look at March shows that on the first of the month, there were 12 percent fewer listings than March 2014.
  • The townhouse/condominium segment, which was hot in December and January, cooled in February. The number of units sold in February was only one percent more than January and two percent over a year ago. The amount of money spent increased 14 percent, however. The mid-price townhouse/condo market was the hottest segment in February compared to 12 months ago.

Because the highest increases for single-family homes are in the mid-market sector, Orr thinks the uptick in demand probably represents families who went through foreclosure and who are now eligible to purchase again. The paucity of buyers at the low end likely signals that millennials are still holding back from purchasing a home. The low vacancy rates in the rental market support that scenario. Since supply is still constrained at the low price range, sluggish demand is not putting pressure on prices. 

New home sales in February, with 688 closings, showed a 27 percent improvement over January and eight percent over February 2014. The dollar value of those homes was up, too.

“The fact that the average new home was 27 percent larger than the typical resale confirms the extent to which homebuilders have abandoned the entry-level market in favor of the move-up market,” Orr said. “It also shows us why the median sales price of new homes is so much higher than for re-sales, even though the price per square foot is in the same ball-park.”

More Valley housing data is available by subscribing 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.

Listen to Mike Orr discuss the February report at the W. P. Carey School of Business “Research and Ideas” website at http://research.wpcarey.asu.edu/real-estate-data/az-real-estate/the-long-awaited-recovery-in-demand/.

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://knowwpcarey.com.