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.