With big price gains, waning investor interest and plunging foreclosure activity, the metro Phoenix housing market was looking more “normal” this summer than its been for several years, according to a new report by Arizona State University.
Even the number of buyers and sellers has finally begun showing some signs of balance after two years of a chronic shortage of homes for sale.
But there is still much room for improvement, particularly in the new-home market where sales rates are still less than one third of what’s necessary to keep pace with the Valley’s current population growth, the report said.
“Change is in the air. Several factors are pushing the market away from extremes and back toward normality and balance,” said Michael Orr, the report’s author and real estate expert at ASU’s W.P. Carey School of Business.
The median single-family home price hardly changed month-over-month in July — which is common during the hottest summer months — but was still up roughly 30 percent from a year ago to $194,150, the report said. The average price per square foot — an important metric for Realtors — jumped 24.3 percent year-over-year to $118.62.
Town homes and condominiums, on the other hand, were unscathed by the usual summer slowdown. The condo market’s median price for July spiked 50 percent year-over-year to $123,001, which ASU noted was mostly due to a short supply of listings.
Then there’s foreclosure activity, which has taken a steep plunge this year and is dramatically improved from 2009 peak levels, Orr said.
As of July, foreclosure starts – meaning when owners receive notice that their lenders may foreclose in 90 days – dropped 61 percent from a year ago and completed foreclosures were down 56 percent during the same period.
As a result of rising prices and availability of distressed properties waning, investors and all-cash purchasers have been losing interest in the Valley, which has left more room for owner-occupiers and financed purchases to gain some market share, Orr said.
For instance, investor purchases made up 27 percent of the market in July. That’s down significantly from last July, when investors purchases peaked at nearly 40 percent.
The other issue for the Phoenix housing market has been supply, or rather the lack thereof.
On Aug. 1, there were 11,907 active single-family listings for the Valley on the Arizona Regional Multiple Listing Service.
That’s up 6.5 percent from July 1 and a 26 percent jump year-over-year, Orr said.
But to really understand supply, you have to break it down by price range.
Nearly all of the growth in supply is occurring in the mid price range ($150,000-$500,000), with some improvements in the luxury market as well.
This is why the Valley saw a 40 percent year-over-year jump in mid-range sales in July and a 64 percent rise in luxury sales.
The lower-end market, however, continues to suffer greatly from supply constraints. Homes priced below $150,000 made up only 16 percent of all listings on Aug. 1.
This may help explain why such lower-end sales took a 37 percent nosedive year-over-year in July.
“We have been through enormous turbulence since 2002, and it will be a relief to many to be operating in a normal, healthy market,” Orr said. “We are not there yet, but the direction is becoming clear.”
- This Article Published in the Phoenix Business Journal.
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