Tag Archives: Center for Real Estate Theory and Practice

housing.prices

Could Looser Lending Standards Boost Phoenix Market?

Will banks start to drop their standards and let people with slightly lower credit scores and much lower down payments buy homes? That’s the big question, after the Federal Deposit Insurance Corporation (FDIC) and other agencies voted to approve new, looser lending rules this week. A well-known expert from the W. P. Carey School of Business at Arizona State University says if the change happens, and the adjustments are reasonable, then it could be good for the Phoenix-area housing market, stimulating growth.

Here are the highlights of the school’s monthly housing-market report on Maricopa and Pinal counties, as of August:

• The median single-family-home sales price went up 11 percent from last August, but that’s largely just due to having fewer sales clustered at the bottom end of the market.
• Both supply and demand in the market remain relatively low.
• Lenders have been reluctant to expand the number of people eligible for home loans, which is helping to stunt market growth.

After the housing crash, the Phoenix area had a fast boost in home prices from September 2011 to last summer. This year, prices leveled off and then rose somewhat. The median single-family-home price went up 11 percent – from $192,000 to $213,500 — from last August to this August. The average price per square foot jumped 7 percent. The median townhouse/condominium price went up 10 percent. However, the report’s author explains the median gains are not reflective of higher home values across the board.

“The median went up largely just because we saw a big drop in sales clustered at the low end of the market,” explains Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “The average price per square foot actually dropped last month. I expect prices to move sideways to slightly down over the next few months until supply and demand get back into balance.”

Both supply and demand are relatively low in the Phoenix-area housing market right now. Single-family-home sales activity dropped 15 percent from last August to this August. Investor interest, in particular, has dramatically fallen over the last year. The percentage of homes bought by investors in August was 14.4 percent, way down from the peak of 39.7 percent in July 2012. There aren’t a lot of cheap “distressed” homes to buy, with completed Phoenix-area foreclosures down 43 percent from last August to this August.

“Better bargains for investors can be found in other parts of the country,” says Orr. “Over the last three months, the percentages of homes bought by investors have been lower than we have seen for many years, confirming investors are no longer driving the market the way they did between early 2009 and mid-2013.”

Rental homes remain popular for those who don’t want to buy a house or who can’t qualify for a home loan. Fast turnover and low vacancy rates have already pushed rents up 5.8 percent over the last year in the Phoenix area.

Meantime, we’re seeing a lot of speculation about whether banks will lower their standards and start letting people with good – but not great – credit scores qualify for home loans. Also, conventional loan down payments could be dropped from 10 percent to as little as 3 percent. The chairman of the Federal Housing Finance Agency spoke in Las Vegas this week and indicated that Fannie Mae and Freddie Mac would likely still purchase and retain those loans, if the banks make them.

“Right now, funds are flowing only to a small proportion of potential buyers, who have excellent credit, which is contributing to weaker-than-normal demand for homes to purchase,” explains Orr. “Lenders are reluctant to take any unusual risks in an environment when Fannie Mae and Freddie Mac might take negative, profit-damaging action against the banks on loans sold to them. It appears it will take a major move by Fannie and Freddie to limit those risks before mortgage availability can get back to a normal level and support the next stage in the housing recovery.”

Orr adds, “Banks have to walk the line on their lending standards. They went from the porridge being too hot (standards too lax) to the porridge being too cold (standards too tight). It’s still a while until we get to ‘just right,’ but striking the right balance could move the Phoenix-area housing market toward more sales and more demand.”

Those wanting more Phoenix-area housing data can subscribe 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. More analysis is also available at the W. P. Carey School of Business “Research and Ideas” website at http://research.wpcarey.asu.edu.

housing

No Housing Bubble Right Now in Phoenix

The Phoenix-area housing market is NOT creating another housing bubble to pop anytime soon. The latest monthly report from the W. P. Carey School of Business at Arizona State University shows a lack of enthusiasm from both buyers and sellers. Here are the latest details on Maricopa and Pinal counties, as of July:

• The median single-family-home sales price went up 8 percent from last July, but forward price movement is greatly slowing down.
• Activity in the market was also much slower this July than last July, with the number of single-family-home sales down 19 percent.
• The W. P. Carey School is launching an enhanced-content website where those interested in more in-depth housing-market statistics can get customized views of what’s happening.

Phoenix-area home prices dramatically recovered from the housing crash, quickly rising from September 2011 to last summer. This year, prices dropped a little, leveled off, and then finally, the median single-family-home price rose this summer. The median jumped 8 percent — from $194,000 last July to $210,000 this July. Realtors will note the average price per square foot also went up about 8 percent. The median townhouse/condo price went up about 6 percent to $130,000. However, don’t expect much more upward momentum.

“Most of the median-price increase over the last 12 months is because a greater percentage of the homes being sold are in the luxury market, not because home values overall are increasing,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “We anticipate pricing will move sideways or slightly down over the next few months until supply and demand get back into balance.”

At the moment, both demand and supply are low in the Phoenix area. The amount of single-family-home sales dropped 19 percent from last July to this July. (The only bright spot is new-home sales, which increased their market share from 9 to 12 percent.) Investors have focused on other areas of the country with better bargains, so the percentage of residential properties they bought in July was just 13.6 percent, down from the peak of 39.7 percent in July 2012. Orr says other home buyers aren’t stepping in, and supply isn’t rebounding.

“Usually, when demand is weak for an extended period, supply starts to grow, as it did in the second half of 2005 and throughout 2006 and 2007, heralding the collapse of the housing bubble,” Orr explains. “However, this summer, supply is slowly weakening. It appears that the lack of enthusiasm among buyers has spread to sellers, instead of causing them to panic. Many sellers clearly have the patience to wait for better times and are unwilling to drop prices to dispose of their homes.”

Orr adds the choices for anyone who wants to buy a Phoenix-area house for less than $175,000 are pretty slim. For example, bargain foreclosures are few and far between. Completed foreclosures on single-family homes and condos are down 45 percent this July from last July.

The limited options at the low end of the market are also contributing to the booming demand for single-family rental homes. Orr says fast turnover and low vacancy rates have already pushed the rent on single-family homes in the most popular areas up 7.5 percent over the last 12 months. Affordable apartment and condo rentals have also become hard to find.

In order to better serve the public with more insight on the Phoenix-area housing market, Orr and the Center for Real Estate Theory and Practice at the W. P. Carey School of Business are launching a new enhanced-content website today. In addition to the free news releases distributed by the school, those wanting more housing data can subscribe at www.wpcarey.asu.edu/realtyreports. The premium site includes statistics, charts, graphs and the ability to focus in on whatever interests you most about the market.

“Though we’ve already had a great response to our housing reports, we wanted to make our real estate information even more useful to people,” says Orr. “With the enhanced site, you’re able to customize your view to more closely examine data in particular price ranges, specific parts of the Valley, and even certain transaction categories. We think the real estate community will be really pleased with the new tools.”

housing

Phoenix Housing Market in a Slump

The Phoenix-area housing market is officially in a slump. That’s according to a new report from the W. P. Carey School of Business at Arizona State University, which reveals the latest details on Maricopa and Pinal counties, as of June:

* Though the median single-family home price went up 11 percent from last June, the forward price movement has dramatically slowed down from last year.
* Activity in the market remains sluggish, with single-family home sales down 11 percent from last June.
* A few slightly encouraging signs were for builders, who saw an uptick in new-home sales in June and their highest monthly total of new single-family construction permits in more than two years.

Phoenix-area home prices shot up from September 2011 to last summer, before slowing down and then even dropping a little earlier this year. Then, this June – after three months of almost stagnant prices – the median single-family-home price finally rose to $211,000. That’s up 11 percent from $190,000 last June. Realtors will note the average price per square foot went up about 10 percent. However, the report’s author says we’re not likely to see much more forward movement for a while.

“We’re in an 11-month slump in demand; sales were very low in the spring,” says Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “There are a few positive signs that demand may gradually start to recover during the second half of this year, but we are unlikely to see much help for pricing until 2015 because there is always a long delay – typically nine to 15 months — between any change in the market and the resulting change in pricing. Meantime, we may see a little downward correction, not a bubble bursting, as some have predicted.”

While sales of luxury homes continue to do OK in this market, demand for other categories remains weak. Sales of single-family homes and condos were down 11 percent from last June to this June.

Fewer investors are focusing their attention on the Phoenix area, now that better bargains can be found elsewhere. The percentage of Phoenix-area residential properties purchased by investors dropped all the way from the peak of 39.7 percent in July 2012 to 14.4 percent this June. That’s down around the historic norm for the Phoenix area. However, something is changing a little to create a different type of demand.

“We are finally seeing a change in the trend of low household formation,” explains Orr. “The nation saw some improvement in the second quarter of 2014. This means more people may be moving out and renting or buying their own homes.”

Perhaps in response to increased household formation, new-home sales had a pretty good month in June. For the first month all year, new-home sales topped the same time last year. In fact, new-home sales went up 5 percent just from May to June alone. New single-family construction permits also hit their highest monthly total since May 2012. Multi-family construction permits and rents continue on a strong upward trend, too.

Still, the supply of homes available for sale, especially at the lower end of the market, remains slim. Active listings (excluding homes already under contract) fell 5 percent during June. Also, new foreclosures aren’t broadly becoming available to create new supply. Completed foreclosures went down 35 percent from last June to this June.

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 will also be available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

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Phoenix Housing Shortage Coming?

The Phoenix area could soon see another shortage of homes for sale, like the one it endured from 2012 to 2013. According to a new report from the W. P. Carey School of Business at Arizona State University, very weak demand is masking the fact that relatively few homes are coming onto the market for sale. The area only recently emerged from another shortage, when buyers had to battle each other for relatively few home options.

Here are the latest details about Maricopa and Pinal counties, as of May:

* The median single-family-home sales price was $205,000, almost unchanged for three months in a row.
* Activity in the market is extremely slow, with demand down around 20 percent from last May.
* This quietness is covering up the fact that the market’s supply of homes for sale has stabilized at about 10 percent below normal, which could lead to another shortage, if demand eventually picks up.

Phoenix-area home prices quickly rose from September 2011 to last summer, before slowing down and even dropping a little earlier this year. The median single-family-home sales price was $205,000 in May, about the same as it was in April and March. However, that’s still up about 11 percent from the median of $185,000 last May. Realtors will note the average price per square foot went up 6 percent year-over-year. The median townhouse/condo price went up 4 percent.

The market has now become extremely quiet, and further price increases are unlikely this year without some growth in demand. The amount of single-family-home sales went down 19 percent from last May to this May. Sales of townhomes and condos dropped 20 percent.

“Demand has been much weaker since July 2013,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “The slight recovery in demand that had been developing over the last two months dissipated again in May. While move-up homeowners and second-home buyers are starting to compensate for the departure of investors who went to other areas of the country for better bargains, activity by first-time home buyers is still unusually slow.”

Orr says some home sellers even appear to be canceling their listings and waiting for another time when buyers have a greater sense of urgency. These families are: 1.) choosing to stay in their homes longer than they did 10 to 15 years ago; 2.) possibly stuck with negative or little equity in their homes, discouraging buying or selling; and/or 3.) wanting to stay in their current homes to preserve their very low mortgage interest rates.

That means the market’s short supply of homes isn’t expected to get much bigger in the near future. Though the supply of active listings went up 69 percent from June 1, 2013 to this June 1, it basically stabilized at about 10 percent below normal. Completed Phoenix-area foreclosures were down 50 percent from last May to this May, eliminating another possible significant source of supply. This could lead to another shortage like the recent one when we saw 95 offers on a single home.

“Between 2012 and 2013, we experienced a chronic housing shortage in Greater Phoenix,” explains Orr. “This shortage has just been temporarily masked by unusually low demand, but that could change at any time. The market has plenty of pent-up demand.”

Orr points out that population and job growth have recovered faster in the Phoenix area than home construction has. The level of single-family-home construction permitting remains very small by historic standards, and single-family new-home construction and sales remain about 65 percent below normal. One bright spot is Pinal County, where new-home sales went up 22 percent from last May to this May.

Meantime, multi-family construction permits and rental-home demand remain strong in the Phoenix area. Unemployment, falling birth rates and greater home-sharing are helping to drive this demand. The supply of single-family homes available for rent was down to 32 days on June 1. The fast turnover and low vacancy rates have already pushed rent up in the most popular locations.

Orr adds, “In Maricopa County, the percentage of properties purchased without financing in May was still at 25 percent. The normal range for cash buyers is only 7 to 12 percent, so mortgage lending still has a long way to go toward recovery.”

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 will also be available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

housing.prices

Big Increases Unlikely for Phoenix Housing Market

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. Here are the latest 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 of Business. “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.

housing.prices

What Comes Next for housing market?

The Phoenix-area housing market is experiencing a normal seasonal spring bounce in activity and prices, but what will happen next? A new report from the W. P. Carey School of Business at Arizona State University talks about the waves of consumers that will likely start returning to the housing market next year, for the first time since the recession.

Here are the latest details about Maricopa and Pinal counties, as of March:

> The median single-family-home sales price recovered from two months of drops and is back to a level similar to December.
> However, demand and sales activity are still dramatically lower than at this time last year.
> The report’s author examines why certain waves of consumers may start returning to the housing market over the next several years.

Phoenix-area home prices quickly rose from a recession low point in September 2011 until last summer, when the jumps slowed down. Then, this January and February, we saw the first two back-to-back monthly drops in the area’s median single-family-home sales price. This March, we saw that dip erased, but probably not for long.

“The bounce is a normal effect of the busy spring sales season, combined with a lot more high-priced homes in the current sales mix,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “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 pricing fade again during the summer months, when the luxury, snowbird and active-adult markets go relatively quiet. We may still be looking at little to no annual price appreciation by the end of the year.”

The median single-family-home sales price was up about 17 percent from last March to this March – from $175,000 to $204,520. The average price per square foot was up 15.5 percent. The median townhouse/condominium sales price was up 16 percent. We no longer have a tight supply of homes for sale like we did at this time last year. Supply stabilized in March, with 64 percent more listings this April 1 than last April 1.

However, low demand continues to be a problem. Single-family-home sales activity was down 20 percent this March from last March. Some of the drop comes from regular home buyers, but also institutional investors are just not as interested in Phoenix, now that better bargains can be found in other parts of the country with more foreclosures. The percentage of residential properties purchased by investors in the Phoenix area this March was down to 17.4 percent from the peak of 39.7 percent in July 2012.

“The institutional investors are doing very little buying or selling in the Phoenix area at the moment,” says Orr. “Their focus has turned to property management, rather than acquisition or disposal.”

The areas doing especially well right now in Phoenix?

Luxury homes priced at more than $500,000 represented 11 percent more of the market’s sales activity this March than last March. High-end demand above $1.5 million was greater in the first quarter of this year than in any first quarter since 2007.
Rental homes are experiencing very strong demand. Interest is so robust that only a one-month supply is currently available on the market.
Multi-family construction permits are on a strong upward trend. In fact, Orr says the first quarter of 2014 was the second-highest quarter for multi-family permits in 12 years.

Meantime, single-family construction permits were down 18 percent this March from last March. New-home sales were down 15 percent.

Orr says, “A key underlying problem for current housing demand is lack of household formation due to many factors, including unemployment, falling birth rates, lower net migration and greater home-sharing, especially among millennials. However, we could see lenders become the most influential decision-makers in this situation. Many lenders are hurting for business, with applications at their lowest level since 2000, and some may become more forgiving, accepting lower credit scores for loans.”

Orr also predicts we’ll see the first major waves of consumers who lost their homes through foreclosure during the recession coming back into the market, starting next year. He says those who lost their homes at the beginning of the downturn will have spent their required seven years in the “penalty box,” and they’ll reemerge from 2015 to 2019. He adds it’s just a question of how many of them want to try again at home ownership.

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.

housing.prices

Phoenix Housing Market Quiets Down

The Phoenix-area housing market is quietly ending the year, with a drop in demand and activity. A new report from the W. P. Carey School of Business at Arizona State University provides the latest data for Maricopa and Pinal counties, as of October:

* The median single-family-home price was up 27 percent, to $200,000, since last October, but price increases are slowing down.
* Demand is rapidly dropping, and the supply of homes available for sale is quickly rising.
*First-time home buyers, especially those under 30, are showing little interest in getting into the market.

Phoenix-area home prices have been going up since they hit a low point in September 2011. The median single-family-home price went up an incredible 71 percent from October 2011 to October 2013. It rose 27 percent – from $157,000 to $200,000 – from just last October to this October. Realtors will note the average price per square foot went up about 24 percent year-over-year. The median townhouse/condo price rose 27 percent, to $119,900.

However, the report’s author says the market has been cooling since July and will continue to lose momentum.

“I anticipate sales will be way down in November and through the holidays, when some people even take their homes off the market until late January,” says Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “We also anticipate a much slower rate of price appreciation in 2014 than the furious pace we have witnessed over the last two years.”

Conditions are getting better for buyers and worse for sellers, as the supply of homes available for sale has been rising fast. The Phoenix area had 40 percent more active listings (those not under contract) this Nov. 1 than last Nov. 1. At the same time, demand has been plummeting. The amount of single-family-home sales activity dropped 19 percent from last October to this October.

Orr believes supply will exceed demand before the end of the year, even though supply is still 15 to 20 percent below what would be considered normal. He blames the sudden weakness partly on poor consumer sentiment, including concern over the recent government shutdown. He also notes Census numbers showing fewer households are forming, as some young adults stay with their parents and others show little interest in leaving their rentals to buy a home.

“When you ask people under 30 whether they want to buy a home, they’re not planning on it like past generations,” explains Orr. “Also, demand for starter homes is limited by the difficulty of first-time home buyers in qualifying for loans. Plus, less than 3 percent of the new homes sold in Maricopa County in October were priced below $150,000, so new entry-level homes are getting very scarce.”

Investors and out-of-state buyers are also losing interest in the Phoenix area. The percentage of residential properties purchased by investors has dropped from the peak of 39.7 percent in July 2012 down to 22.6 percent this October. The percentage of Maricopa County homes sold to out-of-state buyers was down from 20.1 last October to 16.4 this October. That’s the lowest percentage since January 2009.

The luxury home market continues to gain ground, with the stock market booming and the growing availability of jumbo loans. Sales of single-family homes priced above $500,000 grew 34 percent from last October to this October. At the same time, sales of lower-end homes priced below $150,000 fell by almost half — 49 percent.

Cheap homes are hard to find as foreclosure levels continue to drop. The number of completed foreclosures fell about 64 percent from October 2012 to this October. The number of foreclosure starts — owners receiving notice their lenders may foreclose in 90 days – dropped 50 percent at the same time.

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.

housing.prices

Phoenix Housing Market Affected by Government Shutdown

The government shutdown may have dampened interest in buying Phoenix-area homes this fall. A new report from the W. P. Carey School of Business at Arizona State University shows the latest data for Maricopa and Pinal counties, as of September:

* The median single-family-home price was up about 33 percent from last September, to $199,000.
* However, demand is waning, and that may be at least partly due to the recent government shutdown creating economic uncertainty.
* Meantime, housing supply continues to rise, with more people willing to put their homes on the market as prices go up.

Phoenix-area home prices have been rising since hitting a low point in September 2011. The median single-family-home price rose 32.7 percent — from $150,000 to $199,000 –from last September to this September. Realtors will note the average price per square foot went up 22 percent. The median townhouse/condo price went up 30 percent, to $117,000. However, the price gains are expected to slow down.

“Since the beginning of July, the Phoenix-area housing market has cooled dramatically,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “The main change is a steep fall in demand, which we can see in the 12-percent drop in single-family-home sales activity just between August and September alone. Going forward, we anticipate a much slower rate of price appreciation than the furious pace we have witnessed over the last two years.”

Orr says the recent government shutdown may be at least partly to blame for the hard brakes on the housing market.

“The sudden weakness in owner-occupier demand since July is unusual and unexpected,” says Orr. “Poor consumer sentiment and concern over the government shutdown seem to have accelerated the decline. We also have no government information available yet on new-construction permits because of the shutdown.”

On the positive side, the number of available homes for sale continues to rise, after the area experienced a very tight supply for months. Active listings, not including those already under contract, went up 32 percent from Oct. 1 of last year to Oct. 1 of this year. More people appear willing to put their homes up for sale as prices rise.

“If the current trend continues, supply will exceed demand by the end of the year,” says Orr. “We now expect a balanced market to prevail during November. This is great news for buyers since they will experience less competition and be in a strong position to negotiate.”

The luxury market continues to perform well, thanks to the rising stock market and a big increase in the availability of jumbo loans. Sales of $500,000-plus, single-family homes grew an incredible 51 percent from September 2012 to September 2013.

However, cheap homes are tough to find, with fewer foreclosures coming onto the market. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – dropped 61 percent from last September to this September. Completed foreclosures declined 63 percent. Orr expects foreclosures to keep falling over the next several years, thanks to tight underwriting standards.

Institutional investors and out-of-state buyers continue to lose interest in the Phoenix area, since better bargains can now be found elsewhere. The percentage of homes and condos bought by investors in September was down to 22.7 percent, from the peak of 39.7 percent in July 2012. Also, the percentage of Maricopa County residences sold to owners from outside Arizona was only 16.4 percent, the lowest percentage since January 2009.

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.

Phoenix-Area Housing Market

Phoenix-area Housing Supply Increasing

Over the past two years, the tight supply of homes for sale in the Phoenix area has helped to dramatically drive up prices. However, a new report from the W. P. Carey School of Business at Arizona State University shows change on the horizon. The data for Maricopa and Pinal counties, as of August, reveals:

* The median single-family-home price is up 28 percent from last August, to $192,000.
* However, supply is finally starting to increase to help meet demand, and may be in balance by the end of the year.
* The luxury market is powering back, but might be derailed if the economy is pounded by the government shutdown and other events in Washington, D.C.

Phoenix-area home prices have shot up since hitting a low point in September 2011. From last August to this August, the median single-family-home price rose 28 percent – from $150,000 to $192,000. Realtors will note the average price per square foot went up 22 percent. The median townhouse/condo price rose 31 percent.

“We predicted the price-increase slowdown that happened over the summer months,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “Now that temperatures are cooling, prices will start rising again, at least for the near term. However, they’re likely to go up at a less furious pace than the last two years.”

Orr says increases in the amount of homes for sale are helping to stop the price boom. As of Sept. 1 this year, the area had 29 percent more active listings (not under contract) than at the same time last year. As supply has been going up, demand has gone down, with sales of single-family homes 12 percent lower this August than last August.

“Although demand still exceeds supply, they are fast moving toward each other,” says Orr. “If the current pace of change continues, they are likely to be in balance before the end of the year. The seller is no longer holding all the cards in the Greater Phoenix housing market, and if their offers are countered aggressively, some potential buyers may walk away because they now have more alternatives.”

The types of transactions happening in the market are also noticeably shifting. Luxury homes over $500,000 grew their market share from 15 to 21 percent of the money being spent over the past year, while the lowest-priced homes (below $150,000) fell from 25 to 14 percent of the market.

“Access to finance at the high end of the market is very good, and we are seeing interest rates for jumbo loans even lower than the rates for conventional loans,” Orr explains. “However, if the stock market is negatively affected by events in Washington, then this will have an impact on the luxury housing market in Arizona.”

Investors continue to lose interest in the Phoenix market, with better bargains available in other parts of the country. The percentage of residential properties purchased by investors fell from the peak activity of 39.7 percent in July 2012 down to just 23.7 percent this August. The rates of all-cash buyers and out-of-state buyers are also dropping. In fact, the percentage of Maricopa County residences sold to non-Arizona owners in August was only 17 percent, the lowest percentage since January 2009.

Prices in all areas of Maricopa County are up over last year, and cheap foreclosures are tough to find. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – declined 61 percent from last August to this August. Completed foreclosures went down an incredible 73 percent.

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.

98427193

Phoenix-area Foreclosure Saga Ending

The Phoenix-area housing market has finally hit “normal, historical levels” for those going into foreclosure. After years of severe foreclosure trouble, a new report from the W. P. Carey School of Business at Arizona State University reveals that good news and more for Maricopa and Pinal counties, as of May:

* The median single-family home price rose again to $185,000, up about 26 percent from May of last year.
* The final chapter of the foreclosure crisis is wrapping up in Phoenix, as foreclosure starts — homeowners receiving notice their lenders may foreclose in 90 days – finally hit normal, historical levels in May.
* On the negative side, the chronic shortage of area homes available for sale continues to be an issue and could last for years.

Phoenix-area home prices hit a low point in September 2011 and have risen dramatically since then. The median single-family-home price reached $185,000 this May, up from $147,000 last May. That’s a boost of 25.9 percent. Realtors will note the average price per square foot went up 22 percent at the same time. The median townhouse/condo price went up about 27.1 percent.

“Between this January and May alone, the average price per square foot rose about 13 percent for area single-family homes,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “However, the upward pricing pressure should disappear during the summer. I expect the prices to resume their strong upward direction in the fall, once temperatures drop below 100 degrees and snowbirds return.”

Rising prices don’t appear to be dampening the housing recovery in the Phoenix area at this point. In fact, home-and-condo sales activity went up 6.6 percent between April and May. May is the second month in a row where activity increased from the same time during the prior year, reversing a long negative trend. Even the luxury market is gaining, with more sales in May than in any other single month over the past six years.

“There has been much talk of rising interest rates and the negative effect this might have on demand,” says Orr. “The sudden and recent increase in rates has certainly reduced the motivation to refinance existing home loans. However, it is almost certainly increasing buyers’ determination to purchase homes now, rather than later, when rates may go even higher.”

Orr adds he sees early signs some lenders may react to higher interest rates by easing up their rules, allowing more people to buy homes. He also believes prospective buyers may simply settle for purchasing smaller, more affordable houses than they originally wanted, in order to manage the higher interest payments.

At the same time, the wave of foreclosures triggered by the housing crisis appears to be ending in the Phoenix area. Completed foreclosures on single-family homes and townhome/condos in May were down 53 percent from last May. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – went down an incredible 67 percent in the same period. Given population growth, this means the area finally hit its normal, historical level of foreclosure starts this May.

“Foreclosure starts dropped 15 percent just between April and May alone,” says Orr. “Foreclosure levels are now far below the peak levels of March 2009, and the number of pending foreclosures is below the level from the first quarter of 2002. We expect these numbers to continue to fall over the next several years due to the very tight underwriting standards in place.”

Without cheap foreclosures coming into the market — and with ordinary homeowners reluctant to sell because they’re either locked in by negative equity or waiting for prices to keep rising — the Phoenix-area housing market continues to struggle with a chronic shortage of homes available for sale that may last for years. The number of active single-family listings without an existing contract was just over 11,000 as of June 1. That’s down 0.4 percent since May 1, and 83 percent of the available homes are priced above $150,000, creating a problem for those looking in the lower price range. At least the shortage has improved somewhat from last year, when supply was dropping at a rate of 6 percent per month.

“The chronic shortage applies to both homes for purchase and homes for lease,” Orr explains. “The average time for a leased home to be on the market is down to about one month. With this fast turnover and relatively low vacancy rates, it’s perhaps surprising that single-family and condo rents have only very modestly increased.”

New-home builders don’t appear too anxious to help meet the demand. They are trying to make sure they don’t overbuild like they did before the housing crisis, and they want to keep prices moving up. Current new-home sales rates are less than a third of what would normally be needed to keep up with local population growth. As a result, Orr says the combined population of Maricopa and Pinal counties grew 2.9 percent from 2010 to 2012, but the number of owned and leased dwelling units only grew by 1 percent.

Lastly, institutional investors continue to lose interest in the Phoenix area. Their buying spree that began in 2011 is in a downward trend. The percentage of the area’s total single-family-home and condo sales carried out by investors is down from 39.7 in July 2012 to 27.3 percent this May. Most investor transactions are actually going to so-called “mom and pop” purchasers. Orr says they own roughly 96 percent of the area’s rental-home inventory.

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full_Report_201306.pdf. 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.

housing.prices

No Housing Bubble for the Phoenix Area?

Despite dramatic home-price boosts, don’t expect another housing bubble anytime soon in the Phoenix area. A new report from the W. P. Carey School of Business at Arizona State University breaks down what’s happening in the Maricopa and Pinal County housing market, as of April:

* The median single-family home price climbed again to $181,399, up almost 30 percent from April of last year.
* The report’s author sees no housing bubble on the way, with a very tight supply of available homes for sale.
* He also sees no significant negative effect yet from rising interest rates on local housing demand.

Phoenix-area home prices have been soaring since they reached a low point in September 2011. The median single-family home price rose 29.6 percent — from $140,000 to $181,399 — between April 2012 and April 2013. Realtors will note the average price per square foot went up 23.5 percent. The median townhouse/condo price went up 34.6 percent.

“In previous reports, we predicted prices would rise significantly during the strong annual buying season that lasts until June,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “From February through April, the average price per square foot did rise more than 9 percent for single-family homes, but the upward pricing pressure may finally ease somewhat this month.”

One big reason for the price gains has been the chronic shortage of available homes for sale in the Phoenix area. The number of active single-family-home listings (not including those already under contract) fell 7.3 percent just from April 1 to May 1. Only 24 days of lower-end supply (priced under $150,000) is out there. However, the frequent drops in supply have at least slowed down enough to let the market accumulate 20 percent more listings than it had at the same time last year.

Investor interest in Phoenix has also waned as prices went up and better bargains were still available in other areas of the country. Orr says the institutional-investor buying spree here began in 2011, peaked in summer 2012, and is now in a downward trend. The percentage of homes purchased by both small and institutional investors in Maricopa and Pinal counties in April was 26.8 percent, down all the way from 39.7 percent in July 2012, and most of these purchases were actually made by small-scale investors.

Many of the investor-purchased homes have already been turned into rentals for people who lost their houses during the recession. Some commentators have been saying there might be another housing bubble when investors decide to sell these homes, but Orr strongly disagrees.

“Some commentators talk ominously of a bubble bursting when these homes come back onto the market,” he says. “Such talk gets a lot of attention because we are over-sensitized to bubble talk after the disruptive events of 2004 to 2006. However, this idea falls flat when we examine the actual number of homes involved. The entire institutional inventory of 10,000 to 11,000 rental homes here represents a tiny fraction, less than 1 percent, of our housing stock. If every single one were to be placed for sale next month, we would still have less supply than in a normal balanced market.”

Demand from investors is already being replaced by demand from owner-occupiers and second-home buyers. Most homes priced below $600,000 continue to attract multiple offers within a short time. The luxury market is also gaining some steam. Single-family-home sales activity overall went up 4 percent from April 2012 to this April, beginning to reverse a long downward trend in year-over-year activity.

“There has been much talk of the negative effect that rising interest rates might have on demand,” says Orr. “So far, the increases have been minor, and the main effect has been to reduce the motivation to refinance existing home loans. At the same time, higher interest rates often create a greater sense of urgency among home buyers, so if lenders simultaneously relax their underwriting rules, this could stimulate demand, rather than reduce it.”

The market also continues to recover from the foreclosure crisis. The number of completed foreclosures on homes and condos in April of this year was down 46 percent from April last year. Foreclosure starts – homeowners receiving notice their lenders may foreclose in 90 days – dropped 60 percent. Orr expects the rates to fall below long-term averages soon.

With fewer foreclosures coming on the market, some buyers have turned to new-home builders. However, Orr says the construction industry is still building far fewer homes than needed to keep up with rising population and demand in the area. This is partly because the prices of land, materials and construction labor are all rising as subcontractors struggle to attract more workers. He says the developers are also being very cautious in their expansion. They enjoy the fact that limited supply allows them to continue increasing prices faster than their costs and don’t want to disturb this trend by overbuilding.

“Given the balance between supply and population growth in Phoenix, home prices are unlikely to fall below today’s level and are more likely to continue to climb for a long time, though at a more gentle pace.”

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full-Report-201305.pdf. 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.

Arizona Is Losing Economic Grounds To Other Southwestern States, 2008

Rebound for Arizona and U.S. Slows Down

Jobs, home prices and population growth are all slowly rebounding in Arizona. However, experts from the W. P. Carey School of Business at Arizona State University say we still have a long way to go, and the automatic federal budget cuts known as the sequester aren’t helping our momentum. The experts delivered their forecasts today at the annual Economic Outlook Luncheon sponsored by the Economic Club of Phoenix.

Research Professor Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School, confirmed Arizona is once again a Top 15 growth state for both employment and population, but we’re not back to normal levels. From 1960 to 2007, we routinely ranked among the Top 5 states for both employment and population growth. In the rough years from 2008 to 2011, we dropped down to No. 48 and No. 14 in those areas.

“Last year, we finally bounced back to No. 8 for employment growth and No. 7 for population growth,” said McPheters. “However, the sequester and other factors have been clouding the economy here in recent months, and the year-over-year job-growth ranking issued this March dropped Arizona down to No. 13. The state will have to wait a couple more years for full recovery.”

Arizona added 48,900 jobs in 2012. The state is projected to add 61,000 jobs this year. The fastest-growing industries are construction, wholesale trade, information, state government and leisure/hospitality.

“Arizona has gained back 39 percent of the 314,000 jobs we lost in the recession,” explained McPheters. “However, that’s a pace well behind the nation as a whole, which has regained 67 percent of its 8.8 million lost jobs.”

In recent years, population growth in Arizona had dropped from the state’s typical 2- to 3-percent range to less than 1 percent. Finally last year we popped back up to 1.3 percent.

Personal income may also be coming back. The consensus of Arizona Blue Chip economists shows growth in this area of 3.7 percent in 2012, 5.1 percent expected in 2013, and 6 percent expected in 2014.

“The bottom line is that Arizona is doing better than most states, but this will still be the seventh year in a row of lean, subpar growth for us,” said McPheters.

Dennis Hoffman, economics professor and director of the L. William Seidman Research Institute at the W. P. Carey School of Business, reiterated that Arizona is recovering more slowly from this recession than from others in the past. However, we are coming back stronger than the nation as a whole in most areas of the economy. Hoffman expects the United States to see 2- to 3-percent gross-domestic-product (GDP) growth this year. That will likely include more moderate job growth and low inflation.

“The economy is plodding along, assisted by the real-estate and stock-market recoveries, low fuel prices and innovation in the business world,” said Hoffman. “Still, we face a lot of uncertainty from our national-debt crisis, political squabbling in Washington, economic difficulties in Europe and China, and changing demographics. One huge issue remains the problem of future funding for Social Security and Medicare.”

At the state level, Hoffman says we’re going to be strongly affected by the decisions still to be made this year on possible Medicaid expansion, the loss of the temporary sales tax, the potential taxing of online sales, and other big issues. For now, state revenue has been coming back with the rebounding economy.

When it comes to the housing market, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business, delivered good news about the recovery. Specifically, the median Phoenix-area home price was up a whopping 58 percent from a low of $111,000 in May 2011 to $175,000 this March. Foreclosures were down 60 percent just over the last year from March 2012 to March 2013, and Orr expects foreclosure rates to dip below long-term averages by the end of next year. Also, less than 5 percent of Arizona home loans (not already in foreclosure) are delinquent now.

However, we do face some problems in the housing market. For one thing, there’s a chronic shortage of homes for sale. Now that there’s no flood of cheap foreclosures and short sales coming onto the market, buyers are dependent mostly on normal resales and new-home sales.

“Higher prices would normally bring more ordinary home sellers into the market, but many are either locked into their homes because of negative equity, or they’re simply waiting for prices to go up more,” explained Orr. “As a result, some buyers are turning to new-home sales, but developers are reluctant to overbuild as much as they did at the market peak. Therefore, we may see about 50,000 to 60,000 new people being added to our local population this year, but only around 12,000 new single-family homes being built.”

Today’s Economic Outlook Luncheon was held at the JW Marriott Desert Ridge Resort & Spa in Phoenix. The Economic Club of Phoenix hosts this event every spring, as one of its opportunities for Valley business leaders and others to network and engage. The club was founded by a group of prominent business executives called the Dean’s Council of 100, in conjunction with the W. P. Carey School of Business. More information about the club can be found at www.wpcarey.asu.edu/ecp.

Today’s presentations will be posted at knowWPCarey, the business school’s online resource, at http://knowwpcarey.com.

home.prices

Phoenix-area Housing Prices Keep Soaring

Home prices continue their upward climb in the Phoenix area, with more momentum expected until at least June. A new report from the W. P. Carey School of Business at Arizona State University reveals the latest information about the Maricopa and Pinal County housing market, as of March:

The median single-family home price was all the way up to $175,000, about a 30-percent increase from March of last year.
The supply of homes for sale continued to fall, but the problem is not so much the high demand, but more the lack of sellers getting into the market.
Rebounding population growth in the Phoenix area is also blasting past the rate at which builders are constructing new homes.

Phoenix-area home prices reached a low in September 2011 and have largely shot up since then. The median single-family home price went up 29.7 percent – from $134,900 to $175,000 – in the year from March 2012 to March 2013. Realtors will note the average price per square foot went up 23.6 percent during the same time. The median townhouse/condo price increased 43.2 percent – from $81,000 to $116,000. A big reason for all this upward movement is the scarcity of affordable homes for sale.

“The number of active single-family listings has been dropping fast and went down another 4 percent from March 1 to April 1,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “Fewer than 12,000 single-family homes were up for sale (without an existing contract) on April 1, and 80 percent of those were priced above $150,000, making it very tough to find properties in the lower price range.”

Orr adds it’s actually not high demand that’s the major culprit here.

“The low number of sellers is what’s unusual, not the number of buyers, which is only slightly above normal,” he says. “Higher prices would normally encourage more ordinary home sellers into the market, but many are either locked into their homes because of negative equity, or they’re simply waiting for prices to go up more.”

Orr says most homes priced below $600,000 continue to attract multiple offers, and March is the peak of the buying season that lasts from January to June. However, due to the chronic supply shortage, the amount of single-family home sales actually went down 8 percent from March 2012 to March 2013.

Investors are also starting to lose some interest in the Phoenix area, since bigger bargains can be found in other areas of the country that haven’t rebounded as fast. The percentage of residential properties bought by investors dropped from 29.2 percent in February to 27.1 percent in March, the lowest percentage in several years. The market is now seeing increased demand from owner-occupiers and second-home buyers, instead.

Completed foreclosures were down an incredible 60 percent from March 2012 to March 2013. Foreclosure starts – homeowners receiving notice their lenders may foreclose in 90 days – dropped 53 percent. Orr believes we’ll see foreclosure-notice rates “below long-term averages” by the end of next year.

Meantime, new-home sales are also going up, in tandem with resale prices. In Maricopa County alone, new-home sales increased 37 percent from March 2012 to March 2013. However, new-home construction isn’t keeping pace with the Phoenix area’s rebounding post-recession population growth. The U.S. Census reports 1,220 single-family-home construction permits were issued in March, a very small number by historic standards. For example, the total in March 1996 was 3,071, and the total in March 2004 was 5,490.

“The population is growing much faster than the housing supply, with an expected 50,000 to 60,000 people being added to the Phoenix-area population this year, but only around 12,000 new single-family homes being built,” Orr explains. “Builders are scratching their heads, trying to figure out what to do. They don’t want to overbuild like they did during the peak, and they don’t want to build a bunch of new homes for people who can’t secure the mortgages needed to buy them with such tight lending conditions.”

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full-Report-201304.pdf. 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.

homes

Prices Up, Foreclosures Down, Investors Losing Interest

Phoenix-area home prices are back on their way up again, after a short drop in January. The latest housing report from the W. P. Carey School of Business at Arizona State University shows soaring prices, dropping foreclosures and waning interest from investors looking at Maricopa and Pinal counties, as of February.

* The median single-family home price shot up more than 4 percent in just one month — January to February.
* The median single-family home price went up 36.5 percent from February 2012 to February 2013.
* Foreclosures have resumed their downward trend, after a brief post-holiday bump, and they are likely to fall below the “normal,” long-term level by the end of next year.

Phoenix-area home prices have risen sharply since hitting a low point in September 2011. The median single-family home price went up 4.3 percent from January to February. It went up 36.5 percent – $124,500 to $170,000 – from last February to this February. Realtors will note the average price per square foot rose 30.9 percent year-over-year. The median townhouse/condo price increased 39.4 percent – from $77,500 to $108,000.

“These substantial increases were predicted in our last report and are almost certain to continue in March,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business at Arizona State University. “Pricing typically strengthens during the peak buying season from February to June each year.”

Orr adds the market is still dealing with a chronic shortage of homes available for sale. The number of active single-family-home listings (without an existing contract) in the greater Phoenix area fell about 5 percent just from February 1 to March 1. Also, 79 percent of the available supply is priced above $150,000, creating a real problem in the lower range.

“The shortage continues to get more severe among the most affordable housing sectors,” says Orr. “Overall, ‘distressed,’ bargain supply is down 32 percent from last February, since we’re seeing fewer foreclosures and short sales. First-time home buyers face tough competition from investors and other bidders for the relatively small number of properties available in their target price range.”

Thanks to the tight inventory, the amount of single-family-home sales activity was down 10 percent this February from last February. Things don’t appear to be getting better.

“Higher prices would normally encourage more ordinary home sellers to enter the market, but it seems many potential sellers are either locked in by negative equity and/or staying on the sidelines, waiting for prices to rise further,” explains Orr. “At some point, we will reach a pricing level where resale supply will free up, but we are not there yet.”

While high-end, luxury-home resales are picking up some steam, many frustrated home buyers in the lower price range have been turning to new-home construction. As a result, new-home sales were up an incredible 67 percent from last February to this February. New-home sales have almost doubled their market share from 6 percent to 11 percent over the last 12 months. Still, Orr says new-home sales have a long way to go to recover their normal percentage of the market.

He adds, “New homes are not being built in sufficient quantity to match the population growth in the Phoenix area. The construction industry remembers overbuilding from 2003 to 2007, contributing to the disaster in 2008 that resulted in layoffs and bankruptcies for some developers. For now, it looks like they will probably build fewer than half the homes needed to keep pace with current population trends.”

Investor interest also continues to wane in the Phoenix area. The percentage of homes bought by investors from 2011 to mid-2012 was way up, but it declined in Maricopa County from 37 percent last February to 29.7 percent this February. Many investors are looking at other areas of the nation where prices haven’t recovered as much and more bargains are available. Orr labels it a “significant down trend” here.

Foreclosures and foreclosure starts (homeowners receiving notice their lenders may foreclose in 90 days) are both back on a downward trend, too, after a short post-holiday bump. Completed foreclosures on single-family homes and townhome/condos fell 25 percent from January to February alone. They were down 52 percent from last February. Foreclosure starts were down 61 percent from last February. Orr predicts foreclosure-notice rates may be down to “below long-term averages” by the end of 2014. Meantime, the lack of cheap foreclosed homes continues to help push prices up.

“The significant annual price increase over the last 12 months has now spread to all areas of greater Phoenix,” says Orr.

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full-Report-201303.pdf. 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.

Phoenix-Area Housing Market

How to Survive the Phoenix-area Housing Market

The Phoenix-area housing market is especially difficult for home buyers to navigate right now. They face rising prices, competition from investors and other bidders, and a short supply of available homes for sale. That’s why The Arizona Republic and the ASU Real Estate Council at the W. P. Carey School of Business are hosting a free event to help people sort through the complications.

“We keep hearing from potential home buyers how tough it is to deal with current conditions in the Valley housing market,” says Catherine Reagor, who covers the real estate market for The Arizona Republic and azcentral.com. “This is one way to help.”

The event called “Phoenix Housing Market Explained” will be held Saturday, April 6, starting at 9:30 a.m. at Arizona State University’s Tempe campus.

It will feature:

* Catherine Reagor, senior real estate reporter for The Arizona Republic
* Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business
* Mark Stapp, the Fred E. Taylor Professor in Real Estate and director of the Master of Real Estate Development (MRED) program at the W. P. Carey School of Business

The three will participate in a panel discussion and then take questions from the audience. Reagor will offer insight into what she’s seeing as buyers and sellers negotiate ever-changing market conditions…and prospective buyers try to secure a mortgage.

Orr, a prominent real estate expert whose monthly reports on the Phoenix-area housing market are often covered by the national media, will talk about many factors that could affect prospective home buyers right now.

“Everything from investors to rising prices and the short supply of houses are coming into play for people who want to own a new home,” says Orr. “It can be frustrating to bid repeatedly for properties and still come up dry. I’ll go over some of the latest data that could help provide an edge.”

Stapp, an established real estate developer himself, will moderate the discussion and explain current trends in new-home building.

The event will be held in the Business Administration C-Wing Building, or BAC, at 400 E. Lemon St. at ASU in Tempe. Parking is available just across the street at the intersection of Apache Boulevard and Normal Avenue. Signage will direct participants from the garage to room BAC 116 on the first floor of the BAC building.

Because space is limited, registration is encouraged at conversations.azcentral.com. More information about the event can be found at www.money.azcentral.com, www.wpcarey.asu.edu, or by calling (602) 444-4931.

More information about the Valley real estate market is available in the W. P. Carey School’s monthly reports at http://wpcarey.asu.edu/finance/real-estate/market-reports.cfm.

housing.prices

Phoenix Area Ready for Even Higher Home Prices

Even though the median Phoenix-area home price shot up by more than a third last year, we can expect area prices to keep soaring in 2013. That’s according to a new housing report from the W. P. Carey School of Business at Arizona State University, which offers the latest numbers for Maricopa and Pinal counties, as of January:

The median single-family home price went up 35.3 percent — from $120,500 to $163,000 – between January 2012 and January 2013.
The very limited supply of homes available for sale in the lower price range is expected to keep pushing prices higher.
Foreclosures went up somewhat in January, but it’s believed to be a normal, post-holiday-season bump that is already reversing.

Home prices have risen dramatically in the Phoenix area since reaching a low point in September 2011. The median single-family home price actually went slightly down between December 2012 and January 2013, but it’s expected to be a tiny blip on the radar. The new report by Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business, says low inventory will keep forcing home prices higher in the Phoenix area this year.

“The recent decline was predicted in our last report and is a seasonal effect,” explains Orr. “Pricing is almost always weaker in January, but February signals the start of peak buying season that lasts until the end of June. Make no mistake – prices are going to rise significantly during this period. There is nowhere else for them to go until a significant new source of active listings enters this supply-constrained market.”

The median single-family home price was already up 35.3 percent – from $120,500 to $163,000 – from January 2012 to this January. Realtors will note the average price per square foot went up 28.5 percent at the same time. The median price of a townhouse/condominium went up a whopping 45 percent – from $70,000 to $101,500.

Sales activity fell 12 percent from January to January, largely because of the lack of inexpensive homes available for sale. At the higher end of the market, sales are up somewhat from last year, but at the low end, multiple bidders face tough competition for few homes. Discounted, “distressed supply” – like homes from foreclosures and short sales — dropped 38 percent from the beginning of February 2012 to the beginning of February 2013. Overall, the number of single-family homes for sale priced under $150,000 (without a signed contract) is only a 43-day supply. Still, this is better than the 18 days of inventory available in June.

“We still have a long-term supply shortage with only about 50 percent of the active listings (without contracts) that we would expect to see in a normal market,” says Orr. “Consequently, the trend is for prices to continue to rise across most sectors. Most homes priced reasonably below $500,000 continue to attract multiple offers in a short time. Sellers are firmly in control.”

Since the number of bargain foreclosed homes and short sales available is generally dropping, many buyers are turning to alternatives like new-home sales, which are up an incredible 61 percent this January from last January. New-home construction permits are up 42 percent from a year ago. Home builders bought up a massive 2,272 lots in December to help meet demand. However, the trend dropped off in January, with only 143 lots changing hands, so Orr says the sales appear to have been timed for tax purposes by sellers concerned about paying higher tax rates in 2013.

Also, investor purchases are declining slowly after peaking in late summer, and Orr anticipates they will decline further as fewer bargains can be found. The percentage of investor purchases in Maricopa County dropped from 39.2 percent in January 2012 to 31.8 percent this January. Orr adds he doesn’t think large investors are driving the market as much as some analysts would have you believe.

“Some commentators have suggested that the presence of large investors is causing the recent price rise,” says Orr. “This vastly exaggerates their effect on our market. Large investors account for only around 8 percent of purchases, and if they disappeared overnight, there still would not be enough homes on the market to satisfy the small investors, second-home buyers and regular owner-occupiers.”

Foreclosures and foreclosure starts (homeowners receiving notice their lenders may foreclose in 90 days) went up a little from December to January. However, this is a normal yearly occurrence, because banks typically pull back on foreclosures during the holiday season. Completed foreclosures on single-family homes and condos were still down 45 percent this January from last January. Foreclosure starts went down 33 percent at the same time.

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full-Report-201302.pdf. 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.

Phoenix-Area Housing Market

Phoenix Housing Report: 2012 Numbers and Look Ahead at 2013

Though home prices continue rising, things are still far from perfect in the Phoenix-area housing market. A new year-end report from the W. P. Carey School of Business at Arizona State University provides a 2012 summary of the numbers for Maricopa and Pinal counties, as well as some insight on what’s ahead:

* The median single-family-home sales price shot up almost 34 percent — $122,500 to $164,000 — from December 2011 to December 2012.
* The supply of homes for sale fell 6 percent from January 2012 to January 2013, with discounted, “distressed” supply down a whopping 42 percent.
* Foreclosures finally plummeted 51 percent from December 2011 to December 2012, signaling we are near the end of a terrible chapter in the Phoenix-area housing market.

Mike Orr, the report’s author, says things have dramatically changed in the Phoenix-area market over the past year or so. Prices have risen significantly since they reached a low point in September 2011.

“2012 was all about low inventory, which has been driving up home prices,” explains Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “Foreclosures and short sales have gone down, eliminating the sources of many cheap homes, so the more expensive types of transactions, like normal resales and new-home sales, went up. As a result, new-home construction, which was at rock bottom in 2011, also really came roaring back in 2012.”

The median single-family-home price in the Valley went up about 33.9 percent from December 2011 to December 2012, rising from $122,500 to $164,000. Realtors will note the average price per square foot went up 27.2 percent. The median townhouse/condominium price went up 42.7 percent, from $70,000 to $99,900.

“However, we expect to see that prices held steady or even fell slightly between December 2012 and January 2013,” says Orr. “Between Christmas and the Super Bowl is always a quiet time for home sales in Greater Phoenix, with ordinary home buyers much less active than average and investors continuing to concentrate on the lower price range.”

On the overall supply of homes for sale last year – Orr says inventory went down 6 percent from the beginning of January 2012 to the start of January 2013. Still, the supply began to bounce back toward the end of the year, increasing 13 percent in the fourth quarter. The supply of cheap, “distressed supply” plunged 42 percent over the year, as foreclosures and short sales fell. Overall sales activity also fell 12 percent for single-family homes and 13 percent for townhomes/condos from December to December.

“With prices moving substantially higher, it’s not surprising that buyer interest eased a little,” says Orr. “We still see multiple bids for many resale listings, but demand isn’t as strong as it was in spring 2012.”

Investor interest has dropped somewhat in recent months, after peaking in late summer. This means ordinary home buyers face less competition from investors’ all-cash offers. Still, all-cash purchases accounted for more than a third (35.5 percent) of the deals in Maricopa County in December. Some investment groups have started buying homes wholesale in bulk from other investors, since the market has become more competitive. Nevertheless, Orr asserts most investors are using their own money and not debt, so he doesn’t expect another housing bubble from this activity.

“Developers are also becoming more active, as bargains become tougher for the average buyer to find and those buyers turn to new-home construction,” says Orr. “Developers are stocking up on vacant lots – having purchased almost 2,300 of them, plus several tracts of undeveloped land, in December alone. However, the number of permits to build on the lots hasn’t shot up, so it looks like developers are trying to remain flexible, deciding whether to build or hold the land for the future.”

Foreclosure starts – homeowners receiving notice their lenders may foreclose in 90 days – are down 40 percent from December 2011 to December 2012. Completed foreclosures are down 51 percent.

Almost all areas of the Valley rebounded significantly in 2012. In fact, Wickenburg is the only city where the average price per square foot went down from December 2011 to December 2012.

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full-Report-201301.pdf. 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.

luxuryrealestate

Luxury Real Estate Market Retrospective: 2001-2012

News archives must be bursting with stories examining real estate’s regional and national trends after one of the most dramatic events in U.S. real estate history. However, with the old adage in mind that all real estate is local, we wanted a clear retrospective of the market we serve without the sensationalism and consistently inconsistent “expert” predictions.

Real estate veterans and industry followers are no doubt aware of the outstanding work Mike Orr has done as founder of real estate research firm The Cromford Report, and his recent appointment to Director of the Center for Real Estate Theory and Practice at ASU’s School of Business. We’ve asked him to analyze specifically our luxury market since 2001.

Though it’s no secret that residential real estate is often a purchase driven by passion, our clients are increasingly concerned about home-as-investment strategy. With this in mind, we analyzed the most helpful statistics for luxury home investors in Phoenix’s Northeast Valley from 2001 through 2012. The analysis covers single family homes $1,000,000 or more in Scottsdale, Paradise Valley, Fountain Hills, Rio Verde, Arcadia, Biltmore, Cave Creek, and Carefree. It is our hope that a better understanding of where we’ve been will help us know where we are going.

Annual Sales

In 2001, there were 396 sales of single-family homes listed at $1,000,000 or more. At the time, Scottsdale (182) narrowly beat Paradise Valley (170) for units sold, but Paradise Valley had a slight edge in terms of dollars spent. Sales in these two areas made up 89 percent of the entire luxury market, with Phoenix trailing at 15 sales in the Biltmore area and 13 in Arcadia. Carefree (7), Cave Creek (4), Fountain Hills (4) and Rio Verde (1) were relatively small markets then, and while they have grown tremendously since 2001, 86 percent of sales are still in either Scottsdale or Paradise Valley.

Sales volume grew slowly in 2002 and 2003, before expanding dramatically in 2004 and 2005 when it peaked at 1,563, almost four times the sales volume a mere four years earlier. Scottsdale accounted for much of the luxury sales growth, thanks to its relatively undeveloped landscape with room for new projects in DC Ranch, Troon, Grayhawk, McDowell Mountain, Pinnacle Peak, the Shea Corridor and Desert Mountain.

Although sales began to decline after the frenzied peak of 2005, luxury home sales remained reasonably buoyant when compared to the market at large, until demand fizzled out in the second half of 2007. The broader real estate market collapse, as well as the stock market collapse in 2008, would destroy confidence in real estate for years to come. Foreclosures and short sales became part of the new vernacular, peaking in 2010 and representing 33 percent of transactions that year. Total annual sales have remained at a similar level for the past five years, but distressed sales have declined to 17 percent of transactions in 2012. Total sales in 2012 were at their highest level since 2007.

Sales Pricing

The Northeast Valley luxury market appears extremely volatile when measured on a shortterm basis, due to relatively low volume and a wide range of price points. Greater accuracy is obtained by measuring pricing over longer periods, and the best way to judge pricing is typically on a per square foot basis. The next chart shows the 12-month moving average sales price per square foot, meaning each month is the average of that specific month and the 11 months preceding it.

In 2001, the luxury market was already troubled by over-supply, and took another hit after the terrorist attacks of 9/11 and resulting stock market weakness. However, by 2004 pricing improved and prices escalated quickly during 2005 and 2006.

Yet, while prices fell from mid 2006 onwards in less expensive markets, luxury market price per square foot continued climbing – despite a slowdown in sales – into the early part of 2008. However, the extreme economic recession and the failures of Bear Stearns and Lehman Brothers took their toll from May 2008 onwards; prices collapsed from the peak of $404 per square foot in December 2007 to reach $290 by May 2010, before drifting to their lowest point ($277) in February 2012. Although the decline from peak to trough was a significant 31%, this is far less than the 59% drop in average price per square foot experienced by the overall market in the Metro Phoenix area.

Pricing finally began to recover as distressed homes worked their way through the system and by the end of 2012, price per square foot had crawled back to $291 and continue to trend upward. “86 percent of sales are still in either Scottsdale or Paradise Valley” “prices collapsed from the peak of $404 per square foot in December 2007 to reach $290 by May 2010.

Supply

During 2004 and 2005, new listings grew at a slower rate than sales volume, but they continued growing in 2006 and 2007 as sales declined; projects began during what we now recognize as the peak took time to finish. This ominous imbalance led to the huge excess of inventory in 2008 when only 766 homes were sold across the entire Northeast Valley luxury market. The number of distressed listings peaked in 2009 at 21 percent of new listings before declining to 9 percent in 2012. The number of new listings in total was at its lowest in 2011; 2012 was the first year since 2007 to show an increase in inventory. By the end of 2012, supply was roughly in balance with demand.

Seasonality

The luxury market is most active during the spring, and most transactions close from March to June each year. Over the last 12 years, this period typically generates sales at a remarkable 39 percent higher rate than the rest of the year.

Summary and Outlook

Between 2001 and 2012 the luxury home market has experienced a period of great turbulence and volatility, though not quite the extremes suffered by the rest of the market. As 2012 came to a close, supply and demand are near balanced. Barring external economic shocks, the luxury market looks likely to be relatively calm and positive.

For a personal analysis of what these numbers mean for your home, please contact our office at 480-991-2050.

housing.prices

Phoenix-area Home Prices continue to Rise

More ordinary buyers are finally getting into the Phoenix-area housing market as home prices continue to rise and investors find fewer bargains to snap up. That’s according to a new report from the W. P. Carey School of Business at Arizona State University, which reveals the numbers for Maricopa and Pinal counties, as of November:

> The median single-family home price continued to rise, jumping from $157,000 in October to $162,500 in November.
> The tight housing supply grew 31 percent between September and December, but another drop may be coming in the spring.
> All-cash offers are finally on a downward trend, signaling that investor interest may be waning a bit and more ordinary buyers are able to successfully compete for homes.

Phoenix-area home prices reached a low point in September 2011, followed by a sharp rise that’s expected to continue into 2013. The median single-family home price in November was up to $162,500 from just $120,000 last November — a 35.4-percent increase. Realtors will note the average price per square foot rose 27.4 percent year-over-year. The townhouse/condo median price is up almost 43 percent, from $70,000 to $100,000.

However, according to the report’s author, Mike Orr, the market is unbalanced, with not enough homes available for the many buyers, especially at the lower end. The number of homes for sale, but not under contract, was down 7 percent year-over-year at the start of December. Specifically, the amount of bargains or “distressed supply” was down a whopping 43 percent from last year. Things started to improve this fall, with total supply up 31 percent from September to December, but Orr doesn’t see more good news coming.

“We don’t see a strong flow of new listings coming onto the market,” says Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “For example, short-sale listings are down about 70 percent compared to this same time last year. As the market improves, it seems many people may have decided to hang onto their homes in an effort to let values keep going up. I also anticipate another possible drop in supply this spring. Unless new-home builders can start keeping up with rising demand, we may have a chronic supply problem.”

Ordinary buyers, who usually need financing, still face multiple bids and tough competition from investors offering sellers preferred all-cash deals. In fact, almost half (48.4 percent) of the single-family-home sales under $150,000 in November were all-cash purchases. However, the percentage of homes bought by investors declined from 35.5 percent in August to 27.5 percent in November. Orr says investor activity peaked around August and is on a long-term downward trend. With the possible exception of a brief, normal holiday spike in December/January, he expects a continued drop in investor activity.

“As prices go up each month, price-sensitive buyers, such as investors, get a little less enthusiastic,” explains Orr. “Bargain hunters haven’t got much left to pick over, which is allowing more normal buyers to jump into the market before prices rise past what they can afford.”

Foreclosures are down in the market. Completed foreclosures on single-family and condo homes dropped 34 percent from November 2011 to November 2012. Foreclosure starts – homeowners receiving notice their lenders may foreclose in 90 days – went down 48 percent.

Sales activity stayed relatively level, dipping just 1 percent from November to November. The most expensive types of sales, new-home sales and regular resales, are up 32 percent and 84 percent. All types of discount sales, such as short sales and bank-owned-home sales, are down.

Almost every area of the Valley has seen prices explode over the past year, led by Pinal County, including Eloy, Arizona City and Maricopa.

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full-Report-201212.pdf. 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.

housing.prices

Phoenix-area Home Prices Rising Again

After several months of hovering in the same tight range, Phoenix-area home prices are on the rise again. A new report from the W. P. Carey School of Business at Arizona State University reveals the numbers for Maricopa and Pinal counties, as of October:

After staying between $149,000 and $150,000 for four months in a row, the median single-family home price finally bounced up to $157,000 in October.
The short supply of homes available for sale on the market has gone up 31 percent over the last three months, but will likely level off for the winter.
New-home sales are skyrocketing – up 85 percent from the same time last year.

The median single-family home price reached $157,000 in October, up more than 34 percent from the same time last year. That’s when it was at just $116,800. Realtors will note the average price per square foot has also gone up almost 26 percent since last October. Prices have been rising sharply since September 2011, with the exception of one recent pause.

“After four months of limited movement in the median single-family home price, the Phoenix area is again seeing an upward trend,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “The summer lull ended, and we had an influx of snowbirds and other buyers. We’re seeing about 5 percent more sales activity this October than last October.”

Some of the increased activity is thanks to more homes becoming available on the market. As prices go up, more existing homeowners are willing to sell. The overall supply of homes and condos available on the Phoenix-area market went up 31 percent over the past three months. However, Orr suspects the supply peaked in November and will start declining again as winter begins. Even now, it’s a relatively tight supply, especially at the lower-priced end of the market.

“The overall number of active single-family home listings without an existing contract as of Nov. 1 was fewer than 12,500 in the greater Phoenix area,” says Orr. “Also, 76 percent of that supply is priced above $150,000, so ordinary buyers in the lower range still face rough competition from multiple bidders, including investors and others making preferred all-cash offers.”

Almost half of the homes bought for less than $150,000 in October were the result of all-cash deals. Though investor presence is declining somewhat in the Phoenix area, investors were still involved in almost 30 percent of the housing-market transactions.

Fewer cheap properties are flooding onto the market as foreclosure rates go down. Foreclosure starts – homeowners receiving notice their lenders may foreclose in 90 days – were down 41 percent this October from last October. Completed foreclosures were down 15 percent.

The market is starting to shift toward a much greater percentage of normal resales and new-home sales. Normal resales are up 100 percent from last October, and new-home sales are up an impressive 85 percent.

“New single-family home sales had a strong month in October, topping 1,000 for the first time since 2010,” says Orr. “As a result, developers are clamoring for new vacant lots on which to build. Because of competition, developers are being forced to pay higher prices than in the recent past, so we conclude new-home prices will rise substantially over the next year. That will also likely pull normal resale prices higher as long as there’s a shortage of housing inventory.”

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full-Report-201211.pdf. More analysis is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

Phoenix-Area Housing Market

Short Supply, Rising Prices In The Phoenix Area Housing Market

Are we actually seeing the start of a housing shortage in the Phoenix area? A new report from the W. P. Carey School of Business at Arizona State University reveals some surprising information for Maricopa and Pinal counties, as of February:

  • Housing supply was down a huge 42 percent from the year before.
  • Foreclosures were down 52 percent from last February.
  • Single-family-home prices have been on the rise since September.

Perhaps most notably, the report’s author, Mike Orr, says some realtors are actually starting to call around to ask people whether they would consider selling homes in desirable neighborhoods.

“Supply is tight, in a pretty extreme way, and it looks likely to stay that way for months,” says Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “The inventory of single-family homes for sale under $250,000 (without a contract already) is less than 25 days of supply. This is highly unusual and signals a market heavily out of balance, with far more buyers than sellers. It’s now becoming a matter of how much of a price increase will get people to start putting their homes back on the market.”

The median price for a single-family home sold in the Phoenix area in February was up 8.3 percent from last year. This includes new-home sales, and it’s an increase from $115,000 to $124,500. Realtors will note the average price per-square-foot went up 4.1 percent.

February is the start of the selling season that normally runs through June. Orr expects to see lots of activity and even “frantic attempts” to buy over the next three months. This is likely to push prices even higher.

“One thing that could slow this down is appraisals,” explains Orr. “That’s because appraisers are still looking at prices from up to three months ago, and they may be reluctant to write appraisals that match the now-higher market value. This will continue to give all-cash buyers a big advantage over those who need to secure a loan.”

Orr adds that foreclosures and short sales continue to exert a strong influence on the market. They represent about 20 percent of total sales. New home sales make up only 6 percent of the total market.

Buyers from outside Arizona account for 26 percent of the transactions. Also, despite the positive momentum, Orr emphasizes there are still many Phoenix area homeowners with loans exceeding the market value of their houses.