Article by Kristena Hansen
As
the chronic shortage of homes for sale worsened last month, the greater
Phoenix housing market kicked off home-buying season with dramatic
price gains and a drop in investor interest, according to the latest
report Thursday from Arizona State University.
The supply problem shoved median Valley home prices to $170,000 in February -- up by 36.5 percent year-over-year, and by nearly 5 percent from the previous month, the report showed.
The average price per square foot -- a metric commonly used by Realtors -- was $110.44, up almost 31 percent year-over-year. Exasperation with the limited supply of existing homes for sale continued to push buyers toward the new-home market, causing the sales volume of newly built homes to climb 67 percent from February 2012 to February 2013, the report said. New-home sales almost doubled their market share from a year earlier, from 6 percent to 11 percent.
The price gains and short supply indicate sellers are maintaining full control of the market, especially for homes priced at the low end. But as bargain deal -- whether through short sales or foreclosures -- are increasingly harder to come by, investor activity is seeing a “significant down trend,” said the report’s author, Michael Orr, a real estate expert at ASU’s W.P. Carey School of Business.
After reaching a high point last summer, investor purchases accounted for less than 30 percent of all home sales in Maricopa County last month -- down from 37 percent a year ago. “The shortage continues to get more severe among the most affordable housing sectors,” Orr said in the report. “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.”
Supply Problem
On March 1, about 12,450 homes in greater Phoenix were listed for sale on the Arizona Regional Multiple Listing Service — down by 5 percent from Feb. 1 and well below historical norms, the report said.
Nearly 80 percent of those listings were priced at more than $150,000, indicating the inventory shortage is most severe in the lower price ranges -- a harsh reality for many first-time home buyers, who continue facing multiple bids, sometimes within hours of properties hitting the market.
Luxury homes, on the other hand -- listings priced at more than $500,000 -- are seeing a balanced proportion of buyers and sellers, the report said.
Existing homes
The median price for existing single-family homes in February was $183,750, up 25 percent year-over-year. The average price per square foot for existing homes grew by almost 17 percent, to $125.78. Orr said normal resales are now by far the most common type of home sale. In February, normal resales surged by 62 percent year-over-year to about 3,750 for the month. That enabled resales to increase their market share from 28 percent last February to 51 percent last month.
New Homes
New-home sales jumped by 67 percent from a year earlier, to 799 in February. Gilbert had the biggest chunk of those sales, with 146. Goodyear trailed in second place with 74, followed by Peoria’s 69 and Mesa’s 62.
While this is encouraging, Orr said it’s becoming extremely difficult for home builders to keep up with demand. “New homes are not being built in sufficient quantity to match the population growth in the Phoenix area,” he said in the report. “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 the current population trends.”
Distressed Properties
Foreclosures and foreclosure starts -- the point when delinquent homeowners receive notice from their lenders saying foreclosure may occur within 90 days -- backslid 25 percent from January to February and by 52 percent year over year. In Maricopa County, there were 1,462 foreclosure starts last month — far below the peak of about 10,100 in March 2009. By the end of next year, Orr predicts foreclosure notices may drop “below long-term averages.”
Although short sales have become a popular alternative to foreclosures, Orr said they have declined as lenders “have been insisting on higher contract prices” before approving short sales, which has “dampened buyer enthusiasm.”
While still slightly less expensive than foreclosures, short sales and pre-foreclosures are still pricier than the average price of a home owned by a government-sponsored enterprise (GSE), such as Freddie Mac.
For example, the average price of short sales and pre-foreclosures climbed by about 10 percent year over year in February, to $165,388, while the average price of a GSE-owned home was $160,269. Bank-owned properties, on the other hand, posted a 42 percent jump in average price last month, to $216,498.
Short sales and pre-foreclosures thus accounted for only 11 percent of all sales in February -- almost half their market share last year of 20 percent.
Investors dropping out as Phoenix home prices show 36.5 percent gains - Phoenix Business Journal
The supply problem shoved median Valley home prices to $170,000 in February -- up by 36.5 percent year-over-year, and by nearly 5 percent from the previous month, the report showed.
The average price per square foot -- a metric commonly used by Realtors -- was $110.44, up almost 31 percent year-over-year. Exasperation with the limited supply of existing homes for sale continued to push buyers toward the new-home market, causing the sales volume of newly built homes to climb 67 percent from February 2012 to February 2013, the report said. New-home sales almost doubled their market share from a year earlier, from 6 percent to 11 percent.
The price gains and short supply indicate sellers are maintaining full control of the market, especially for homes priced at the low end. But as bargain deal -- whether through short sales or foreclosures -- are increasingly harder to come by, investor activity is seeing a “significant down trend,” said the report’s author, Michael Orr, a real estate expert at ASU’s W.P. Carey School of Business.
After reaching a high point last summer, investor purchases accounted for less than 30 percent of all home sales in Maricopa County last month -- down from 37 percent a year ago. “The shortage continues to get more severe among the most affordable housing sectors,” Orr said in the report. “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.”
Supply Problem
On March 1, about 12,450 homes in greater Phoenix were listed for sale on the Arizona Regional Multiple Listing Service — down by 5 percent from Feb. 1 and well below historical norms, the report said.
Nearly 80 percent of those listings were priced at more than $150,000, indicating the inventory shortage is most severe in the lower price ranges -- a harsh reality for many first-time home buyers, who continue facing multiple bids, sometimes within hours of properties hitting the market.
Luxury homes, on the other hand -- listings priced at more than $500,000 -- are seeing a balanced proportion of buyers and sellers, the report said.
Existing homes
The median price for existing single-family homes in February was $183,750, up 25 percent year-over-year. The average price per square foot for existing homes grew by almost 17 percent, to $125.78. Orr said normal resales are now by far the most common type of home sale. In February, normal resales surged by 62 percent year-over-year to about 3,750 for the month. That enabled resales to increase their market share from 28 percent last February to 51 percent last month.
New Homes
New-home sales jumped by 67 percent from a year earlier, to 799 in February. Gilbert had the biggest chunk of those sales, with 146. Goodyear trailed in second place with 74, followed by Peoria’s 69 and Mesa’s 62.
While this is encouraging, Orr said it’s becoming extremely difficult for home builders to keep up with demand. “New homes are not being built in sufficient quantity to match the population growth in the Phoenix area,” he said in the report. “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 the current population trends.”
Distressed Properties
Foreclosures and foreclosure starts -- the point when delinquent homeowners receive notice from their lenders saying foreclosure may occur within 90 days -- backslid 25 percent from January to February and by 52 percent year over year. In Maricopa County, there were 1,462 foreclosure starts last month — far below the peak of about 10,100 in March 2009. By the end of next year, Orr predicts foreclosure notices may drop “below long-term averages.”
Although short sales have become a popular alternative to foreclosures, Orr said they have declined as lenders “have been insisting on higher contract prices” before approving short sales, which has “dampened buyer enthusiasm.”
While still slightly less expensive than foreclosures, short sales and pre-foreclosures are still pricier than the average price of a home owned by a government-sponsored enterprise (GSE), such as Freddie Mac.
For example, the average price of short sales and pre-foreclosures climbed by about 10 percent year over year in February, to $165,388, while the average price of a GSE-owned home was $160,269. Bank-owned properties, on the other hand, posted a 42 percent jump in average price last month, to $216,498.
Short sales and pre-foreclosures thus accounted for only 11 percent of all sales in February -- almost half their market share last year of 20 percent.
Investors dropping out as Phoenix home prices show 36.5 percent gains - Phoenix Business Journal
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