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TEMPE, Ariz. (May 12, 2015) — Supply continued to be the dominant influence in the Phoenix real estate market in March, according to a newly released report from the W. P. Carey School of Business. Buyers are on the increase, especially for townhouses and condos. But, the number of properties for sale is falling in the low and mid ranges, with supply abundant only in the luxury sector. Expect prices to rise in response, but not dramatically, according to Mike Orr, director of the Center for Real Estate Theory and Practice and author of the report.
Demand increased during March, especially in the mid-range. Orr said 28 percent more was spent on single family and townhouse-condominium homes than in March 2014. “After 2014’s weak demand we are back to normal again” in that price range, he said. And, demand for homes above $500,000 remained strong, with the dollar volume up 14 percent for single-family homes and a whopping 56 percent for townhouses and condos.
Demand for low-priced housing is also up, but by smaller percentages. And that’s a good thing, because the supply of homes at $200,000 and less is extremely weak. Orr said supply is “barely adequate” in the mid-range from $200,000 to $500,000 as well.
Orr says that a significant part of the uptick in demand is “boomerang buyers,” people who repaired their credit after foreclosures or short sales between 2008 and 2013. Activity from this group is expected to peak in 2017 and 2018, when the Millennials who have been renting may be expected to be ready to buy.
Meantime, home builders are getting busier, which is reflected in a jump in single family permits pulled in Maricopa and Pinal Counties in March: the 1,438 permits are an increase of 43 percent compared to last March – the highest March total since 2007.
The average square foot of new single family homes in January was 2,640, Orr observed, compared to 2,018 for non-distressed resale homes that month.
“The fact that the average new home was 31 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. Builder can realize higher margins in the more expensive housing market.
Highlights from the March 2015 report:
Orr simplified his analysis of distressed sales this month because they are finally a much less significant part of the market.
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. For more about Orr’s work, see 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/.