March 20, 2015
Expect to see a stronger spring this year in the Phoenix housing market than we saw last year. January was the “lull before the storm,” according to the latest monthly report from the W. P. Carey School of Business at Arizona State University. Here are the highlights of that report on Maricopa and Pinal counties for January:
• The median single-family-home sales price went up 5.6 percent from January 2014 to January 2015 – $197,000 to $208,000.
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• Condos and townhomes continue to gain a larger share of the market.
• Preliminary February figures show demand about to boom, with the number of homes under contract dramatically rising.
After the housing crash, Phoenix-area home prices quickly rose from September 2011 to summer 2013. Then, the median single-family home price went up about another 5.6 percent from last January to this January – from $197,000 to $208,000. Realtors will note the average price per square foot gained 5.1 percent.
Condos and townhomes picked up even more momentum, with their median price up 11.6 percent – from $121,000 to $135,000. While single-family home sales activity dropped 7 percent from last January to this January, townhome and condo sales activity rose 6 percent. In fact, the amount of money spent on mid-range townhomes and condos was up an incredible 54 percent. Orr credits interest in easy-to-maintain homes.
Despite the attached-home phenomenon, though, the Phoenix market experienced relatively weak home-sales activity both last year and in January. However, things finally appear ready to change.
“January is always a quiet month, but we believe this was a lull before the storm,” explains the new report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business at Arizona State University. “We have already seen early signs of much stronger activity from buyers in February and March. Looking at the number of homes going under contract, there was significantly increased demand in the lower and middle price ranges.”
Orr notes that listings for non-distressed homes under contract in the Phoenix area were up 26 percent from last year on a typical day in February. Listings from $150,000 to $600,000 were up more than 30 percent. He attributes this largely to lenders starting to relax their tight loan-underwriting guidelines and “boomerang buyers” who went through foreclosure or short sale being able to come back into the market.
Rental homes are also doing well.
“With relatively fast turnover and low vacancy rates, rents have been increasing in the most popular locations,” Orr said. “We are currently seeing a 5.8-percent rise over the last 12 months across the Greater Phoenix area.”
However, supply is an issue when it comes to all types of homes, including affordably priced rentals, which Orr said are at the lowest level he has seen in 14 years. Single-family home listings (excluding those under contract) were down 7 percent on Feb. 1 from the already depressed level at the same time last year.
“Supply remains relatively low except at the high end of the market,” Orr said. “At the moment, we are seeing early signs that demand is likely to recover quite a bit faster than supply. It would only take a modest increase in first-time home buyer demand to overwhelm the current weak level of supply, making it tougher to find affordable homes for sale.”
Don’t expect more supply to come from foreclosures. Completed foreclosures were down 43 percent from last January to this January.
One last note: Orr said home builders aren’t enjoying 2015 much yet. In January, newly built single-family homes hit their lowest monthly sales total in three years. However, he expects that trend to reverse, too.
Those wanting more Valley housing data can subscribe to Orr’s monthly reports at wpcarey.asu.edu/realtyreports. The premium site includes statistics, charts, graphs and the ability to focus in on specific aspects of the market. More analysis is also available at the W. P. Carey School of Business “Research and Ideas” website, at research.wpcarey.asu.edu.