The Phoenix area is now observing a negative milestone in its housing market. February marked the first time the median single-family-home sales price went down for a second month in a row since the housing rebound started in 2011. A new report from the W. P. Carey School of Business at Arizona State University reveals the latest details about Maricopa and Pinal counties, as of February:
• The median single-family-home sales price was $195,000, the lowest since August.
• Demand and sales activity were dramatically lower than at the same time last year.
• Spring may bring a normal seasonal boost in sales activity, but the market is still on track to possibly have little or no appreciation by the end of the year.
Phoenix-area home prices started rising quickly after hitting a recession low point in September 2011. Then, the price increases began slowing down in July, with the market experiencing two monthly drops in the median single-family-home sales price this January and February – totaling about 5 percent.
“Home-sales activity was a startling 26 percent below February 2013,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School. “Despite the large price gains since last year, the total dollars spent on homes dropped 16 percent between last February and this February. This is the weakest February in four years.”
The median single-family-home sales price was $195,000 in February, still up about 15 percent from February 2013. Realtors will note the average price per square foot was also up 15 percent. The median townhouse/condo sales price was up 13 percent.
Though the supply of homes for sale continues to grow, low demand is affecting almost all types of houses. Even at the high end of the market, which had been going pretty strong, the Phoenix area saw 2 percent fewer luxury-home sales this February than last February.
“The quietness in the market is spreading from the bottom up, but it hasn’t reached the very top yet,” explains Orr. “Homes priced at $2 million and more are still doing OK.”
Orr adds that even new-home sales are suffering now, and some builders are increasing incentives to stimulate buyer interest. New-home sales fell 23 percent from last February to this February.
With single-family-home construction permits still way down by historic standards, more developers appear to be focusing attention on multi-family options. In fact, multi-family permits exceeded the number of single-family permits in both December and February, which is very rare. Orr says he’s seeing a lot of high-end apartment construction, in particular. The single-family rental market is doing extremely well, especially with millennials and those who lost their homes to foreclosure.
Investors continue to lose interest in the Phoenix area, with more bargains to be found in other areas of the country. In February, the percentage of residential properties bought by investors was down to 20 from the peak of 39.7 in July 2012.
Foreclosure levels remain below normal, historic trends for the Valley. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – were down 50 percent this February from last February. Completed foreclosures were down 47 percent. However, even with fewer distressed properties in the pipeline, the market’s future is looking uncertain for the rest of the year.
“The period from March to May is almost always the strongest part of the year for demand, and it is highly probable we will see some upward movement in pricing over the next three months,” says Orr. “However, it’s also likely this advance in pricing will be reversed during the hot summer months of June through September. We may be looking at little to no annual appreciation by the end of the year, if prices behave as we currently expect. Still, the Phoenix market is highly volatile, and nothing is certain.”
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.
Debbie Freeman, ASU