Along with dropping foreclosures and waning interest from investors looking at Maricopa and Pinal counties, as of February, Phoenix-area home prices have risen sharply since hitting a low point in September 2011, according to the latest housing report from ASU’s W. P. Carey School of Business. The median single-family home price went up 4.3 percent from January to February, 36.5 percent from the previous February. At the same time, the median townhouse/condo price increased 39.4 percent.
According to the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice, 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.
Noting “distressed” bargain supply is down more than 30 percent since February 2012 due to few foreclosures and short sales, Orr says, “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.”
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. 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. “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 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. 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.
Housing Inventory Snapshot
Supply of active listings (not including homes already under contract):
Down 3% January to February 2013 compared to being down 10% in same period 2012
Distressed supply: Down 32% from February 2012 to February 2013
Down 24% from January 2013 to February 2013,
Down 61% from the previous February
Investor flips: Down 38% from February 2012 to February 2013
Single-family home sales, non-distressed vs. distressed:
New homes: Up 67%
Normal resales: Up 62%
HUD sales: Up 8%
Short sales and pre-foreclosures: Down 48%
Bank-owned homes: Down 59%