Phoenix Real Estate Prices Up 34% In A Year, New Home Sales Up 85%
Phoenix Business Journal by Kristena Hansen, Reporter Monday, December 3, 2012
After a seasonal slowdown during the scorching summer months, the metro Phoenix housing market was back on the upswing again in October with existing home prices up more than 34 percent year-over-year and new-home sales up a whopping 85 percent, according to a housing report released Monday by Arizona State University’s W. P. Carey School of Business.
The median single-family home price climbed to $157,000 in October, compared with $116,800 in October of last year, the report said.
The October price gains were also notable given the fact that area’s dramatic surge in home prices earlier this year had leveled off in the four months prior, hovering around $149,000 and $150,000. It was also better than September when the median single-family home price, $150,000, was up by 27 percent year-over-year.
“The summer lull ended, and we had an influx of snowbirds and other buyers,” Michael Orr, the report’s author and real estate expert at W.P. Carey, said in the report. “We’re seeing about 5 percent more sales activity this October than last October.”
The overall supply of existing homes for sale -- which had been at historical lows over the summer -- has also risen by 31 percent during the past three months. This increase in supply and activity can be largely attributed to the price appreciations because it encourages more homeowners to sell, Orr said.
Supply, however, is still pretty tight, especially for homes priced in the lower end, Orr said. He also suspects supply peaked last month and will start on a downward trend again as we enter the winter season.
“The overall number of active single-family home listings without an existing contract as of Nov. 1 was fewer than 12,500 in the greater Phoenix area,” says Orr. “Also, 76 percent of that supply is priced above $150,000, so ordinary buyers in the lower range still face rough competition from multiple bidders, including investors and others making preferred all-cash offers.”
The shortage of lower-priced homes is largely due to the decline in distressed properties. In October, completed foreclosures were down 15 percent year-over-year and foreclosure starts -- meaning the number of homeowners who received notices that their lenders may foreclose in 90 days -- were down by an impressive 41 percent, Orr said.
But despite the drop in distressed properties, surge in home prices and still-low inventory, investors are still causing headaches for traditional home buyers. In fact, nearly half of homes purchased for under $150,000 in October were cash deals and almost 30 percent of all transactions in the Phoenix market were conducted by investors.
All these factors have had a domino affect on the new-home market. The Valley topped 1,000 new single-family home sales in October for the first time since 2010, Orr said. That was also an 85 percent spike from the same time last year.
“As a result, developers are clamoring for new vacant lots on which to build,” Orr said. “Because of competition, developers are being forced to pay higher prices than in the recent past, so we conclude new-home prices will rise substantially over the next year. That will also likely pull normal resale prices higher as long as there’s a shortage of housing inventory.”