The Phoenix-area housing market has officially rebounded from artificially low recession levels, and we’re unlikely to see any more big price increases this year. That’s according to a new report from the W. P. Carey School of Business at Arizona State University.
Details about Maricopa and Pinal counties, as of April:
• The median single-family-home sales price stabilized at just under $205,000.
• Demand and sales activity were low for the normally strong spring selling season.
• Rental homes continue to be extremely popular, since many people are ineligible for home loans and/or uninterested in home ownership.
Phoenix-area home prices rose fast from September 2011 to last summer before slowing down, and then even dropping a little bit earlier this year. This April, for the second month in a row, the median single-family-home price was just under $205,000. That’s up 13 percent – from $181,399 last April to $204,900 this April. Realtors will note the average price per square foot was up 12 percent. The median townhouse/condo price went up 4 percent.
Low demand is largely putting the brakes on more significant upward price movement. The amount of single-family-home sales activity was down 16 percent this April from last April. Sales of homes in the range below $150,000 alone fell 37 percent. New-home sales went down 12 percent. All of this, even though the period from March to May is almost always the strongest part of the year for demand.
“The market has completed its rebound from the artificially low prices that prevailed between 2009 and 2011, and further significant increases are unlikely without some growth in demand,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School. “It’s also likely that the recent advance in pricing will fade during the summer months when the luxury, snowbird and active-adult markets go relatively quiet.”
Investors continue to show disinterest in the Phoenix housing market now that better bargains can be found in other areas of the country with more foreclosures. The percentage of residential properties purchased by investors was down to just 16.3 percent in April from the peak of 39.7 percent in July 2012. Completed foreclosures on single-family homes and condos were down 54 percent from April 2013 to April 2014.
In contrast, the supply of homes available for sale is way up, with 73 percent more active listings on May 1 of this year than May 1 of last year. As a result, buyers have far more choices. However, Orr believes that may change if demand and prices don’t pick up. Potential home sellers may stay out of the market, deciding to wait for better times.
“The underlying key problem for entry-level and mid-range housing demand is a lack of household formation due to many factors, including unemployment, falling birth rates, lower net migration and greater home-sharing, especially among millennials,” explains Orr. “However, if household creation were to return to the normal long-term average, we would quickly have a housing shortage here in Greater Phoenix.”
Meantime, the demand for rental homes is very high, and Orr says the availability of those homes is dropping to unusually low levels. He estimates there’s only a 29-day supply of single-family rentals, and therefore, rent is starting to rise in the most popular locations. As a result of this demand, the Phoenix area is seeing a strong upward trend in multi-family construction permits.
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, at http://knowwpcarey.com/index.cfm?cid=13.
Debbie Freeman, Communications Manager, W. P. Carey School of Business