The Phoenix-area housing market is officially in a slump, according to a new report from the W. P. Carey School of Business at Arizona State University, which reveals the latest details on Maricopa and Pinal counties, as of June:
• Though the median single-family home price went up 11 percent from last June, the forward price movement has dramatically slowed down from last year.
• Activity in the market remains sluggish, with single-family home sales down 11 percent from last June.
• A few slightly encouraging signs were for builders, who saw an uptick in new-home sales in June and their highest monthly total of new single-family construction permits in more than two years.
Phoenix-area home prices shot up from September 2011 to last summer, before slowing down and then even dropping a little earlier this year. Then this June – after three months of almost stagnant prices – the median single-family-home price finally rose to $211,000. That’s up 11 percent from $190,000 last June. Realtors will note the average price per square foot went up about 10 percent. However, the report’s author says we’re not likely to see much more forward movement for a while.
“We’re in an 11-month slump in demand; sales were very low in the spring,” says Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “There are a few positive signs that demand may gradually start to recover during the second half of this year, but we are unlikely to see much help for pricing until 2015 because there is always a long delay – typically nine to 15 months – between any change in the market and the resulting change in pricing. Meantime, we may see a little downward correction, not a bubble bursting, as some have predicted.”
While sales of luxury homes continue to fare well in this market, demand for other categories remains weak. Sales of single-family homes and condos were down 11 percent from last June to this June.
Fewer investors are focusing their attention on the Phoenix area, now that better bargains can be found elsewhere. The percentage of Phoenix-area residential properties purchased by investors dropped all the way from the peak of 39.7 percent in July 2012 to 14.4 percent this June. That’s down around the historic norm for the Phoenix area. However, something is changing a little to create a different type of demand.
“We are finally seeing a change in the trend of low household formation,” explains Orr. “The nation saw some improvement in the second quarter of 2014. This means more people may be moving out and renting or buying their own homes.”
Perhaps in response to increased household formation, new-home sales had a pretty good month in June. For the first month all year, new-home sales topped the same time last year. In fact, new-home sales went up five percent just from May to June alone. New single-family construction permits also hit their highest monthly total since May 2012. Multi-family construction permits and rents continue on a strong upward trend, too.
Still, the supply of homes available for sale, especially at the lower end of the market, remains slim. Active listings (excluding homes already under contract) fell five percent during June. Also, new foreclosures aren’t broadly becoming available to create new supply. Completed foreclosures went down 35 percent from last June to this June.
Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed and downloaded at www.wpcarey.asu.edu/realtyreports. A podcast with more analysis from Orr will also be available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.