Source: ASU Center for Real Estate Theory and Practice
W.P. Carey School of Business
Posted: January 10, 2013
The
latest report from Mike Orr, director of the Center for Real Estate
Theory and Practice at the W. P. Carey School of Business, shows that
more ordinary buyers may be getting into the Phoenix-area housing
market, as investor interest wanes a bit.
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.
