Shrinking supply has been the story in the Phoenix real estate market for months, but relief could be here in the second half of the year — at least for some buyers. 

In the past two months the number of building permits issued in the $200,000 to $500,000 range has increased, according to 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 Greater Phoenix Housing Market.

But buyers will still face competition for homes at the affordable end of the market. At the luxury level, where supply is still adequate, the number of homes for sale is expected to fall by the end of the second quarter.

In May, however, tight supply still characterized most of the market. Orr reported that May virtually mirrored April, with demand back to normal and supply shrinking. “This is causing problems for buyers who are experiencing multiple bids in the range below $200,000,” he said.

Although data is not yet available for June, Orr expects it to come in as another strong month for sales. If the market behaves according to its historical pattern, activity should cool as the temperatures rise in July and August, and price hikes should take a break as well. But, “if the current supply shortage persists through the third quarter, we should expect upward price pressure to resume at the end of September.”

Highlights of the May 2015 report:

• The median sales price for single-family homes increased a solid 5.2 percent from April, but price per square foot rose just 0.3 percent. Year over year, the median price was up 11.5 percent (from $200,000 to $223,000) and the average price per square foot grew 7.2 percent (from $125.25 to $134.31).
• The median and per square foot prices for townhouses and condominiums were approximately flat between April and May. The big story is in the year-over-year. Compared to May 2014, the median price was up 11.9 percent (126,000 to $140,950) and the per square foot price was up 5.7 percent ($128.63 to $135.91).
• Active listings dropped 7 percent compared to April. On June 1 there were 21 percent fewer listings than June 2014.
• Demand held steady in May, sustaining a trend that started in March. Single-family home sales rose 1 percent over April and 7 percent over May 2014. Townhouses and condominiums slumped a little, however; sales dropped 5 percent since March but were up 11 percent from May 2014.

Those wanting more Valley housing data can subscribe to Orr’s monthly reports at 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 most highly ranked business schools in the United States. The school is internationally respected 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/.