We know what a person thinks not when he tells us what he thinks, but by his actions.
~Isaac Bashevis Singer (1904-1991)
Adam Kress Digital Editor- Phoenix Business Journal Jul 10, 2014, 1:15pm MST
Balance between supply and demand is a concept that remains lost on the Valley’s housing market.
While prices are steady, new research fromArizona State University shows the market may be on the verge of another housing shortage as single-family home sales in May were down nearly 20 percent from a year earlier. This comes after local home prices quickly increased from September 2011 to last summer before slowing down and even dropping slightly earlier this year.
The flattening in prices comes as the supply of homes for sale has stabilized at about 10 percent below historical norms, which could lead to another shortage if demand eventually picks up.
Michael Orr, author of the ASU report and director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business, said demand has been much weaker since July 2013.
“The slight recovery in demand that had been developing over the last two months dissipated again in May,” Orr said. ” While move-up homeowners and second-home buyers are starting to compensate for the departure of investors who went to other areas of the country for better bargains, activity by first-time home buyers is still unusually slow.”
The median single-family home sales price was $205,000 in May, nearly the same as it was in March and April. However, that’s up about 11 percent from the median of $185,000 in May 2013. Orr‘s report said the average price per square foot went up 6 percent year-over-year. The median townhouse/condo price was up 4 percent.
Completed Phoenix-area foreclosures were cut in half from during that same period, eliminating another source of supply.
The story is different in the multifamily market, as construction permits and rental-home demand remain strong in the Phoenix area.
Orr said unemployment, falling birth rates and greater home sharing are helping to drive this demand. The supply of single-family homes available for rent was down to 32 days as of June 1. The fast turnover and low vacancy rates have already pushed rental rates up in the most popular locations.
“In Maricopa County, the percentage of properties purchased without financing in May was still at 25 percent,” Orr said. “The normal range for cash buyers is only 7 to 12 percent, so mortgage lending still has a long way to go toward recovery.”
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