Short supply, rising prices in Phoenix-area housing market
Are we actually seeing the start of a housing shortage in the Phoenix area? A new report from the W. P. Carey School of Business at Arizona State University reveals some surprising information for Maricopa and Pinal counties, as of February:
• Housing supply was down a huge 42 percent from the year before.
• Foreclosures were down 52 percent from last February.
• Single-family-home prices have been on the rise since September.
Perhaps most notably, the report’s author, Mike Orr, says some realtors are actually starting to call around to ask people whether they would consider selling homes in desirable neighborhoods.
“Supply is tight, in a pretty extreme way, and it looks likely to stay that way for months,” says Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “The inventory of single-family homes for sale under $250,000 (without a contract already) is less than 25 days of supply. This is highly unusual and signals a market heavily out of balance, with far more buyers than sellers. It’s now becoming a matter of how much of a price increase will get people to start putting their homes back on the market.”
The median price for a single-family home sold in the Phoenix area in February was up 8.3 percent from last year. This includes new-home sales, and it’s an increase from $115,000 to $124,500. Realtors will note the average price per-square-foot went up 4.1 percent.
February is the start of the selling season that normally runs through June. Orr expects to see lots of activity and even “frantic attempts” to buy over the next three months. This is likely to push prices even higher.
“One thing that could slow this down is appraisals,” explains Orr. “That’s because appraisers are still looking at prices from up to three months ago, and they may be reluctant to write appraisals that match the now-higher market value. This will continue to give all-cash buyers a big advantage over those who need to secure a loan.”
Orr adds that foreclosures and short sales continue to exert a strong influence on the market. They represent about 20 percent of total sales. New home sales make up only 6 percent of the total market.
Buyers from outside Arizona account for 26 percent of the transactions. Also, despite the positive momentum, Orr emphasizes there are still many Phoenix-area homeowners with loans exceeding the market value of their houses.
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-201203.pdf. More analysis is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com.