Kristena Hansen

Reporter- Phoenix Business Journal

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While the chronic supply shortage of homes for sale across metro Phoenix pushed prices up dramatically yet again in June, the luxury home market has been particularly hot this summer, according to the latest monthly housing report Monday by Arizona State University.
The Valleywide median single-family home price — which includes all type of sales — was $190,000 in June, up by nearly 27 percent from a year ago and 2.7 percent from May, the report said. Normal resales were up about 11 percent year-over-year to a median price of $200,000 in June while new homes surged 27 percent on annual basis to $271,885.
These dramatic price increases are largely due to the fact that there are very few homes available for sale.
There were 11,178 active single-family home listings on the Arizona Regional Multiple Listing Service as of July 1. While that’s a slight 1.2 percent increase from June 1, it’s still very low by historical standards, especially for homes priced below $150,000, which made up only 15 percent of all supply.
As a result, single-family home sales across the Valley dipped 12.7 percent from May to June, the report said.
The luxury market, on the other hand, has seen the highest sales volume of any summer season in six years.
“Access to finance at the high end of the market has improved recently with more lenders offering jumbo loans,” Michael Orr, the report’s author and real estate expert at ASU’s W. P. Carey School of Business, said in the report. “Along with good returns from the stock market, this has strengthened a recovery in the luxury market, where sales volumes were back to 2007 levels in June.”
Soaring prices also continued to temper investor demand and foreclosure activity.
Investors scooped up 26.7 percent of all single-family and condo sales in June, down from 35 percent last year, the report said. However, cash purchases are still prevalent, making up 44 percent of all sales below $150,000 in Maricopa County for the month.
Foreclosure activity also dropped to “normal” levels in June. There were 61 percent fewer completed foreclosures in June than a year ago and 61 percent fewer foreclosure starts, which is when a borrower receives notice that their lender may foreclose in 90 days.
Orr also commented on the impact that rising interest rates have been having on the local housing market.
“Rising rates have certainly reduced the motivation to refinance existing loans, but they have also sped up purchases by some buyers who want to lock in prices and rates,” he said. “Still, other buyers will stop to reconsider their options, likely causing a pause in new contract signings in July and August, but I expect normal activity to resume in October.”
As for the new-home market, Orr said home builders still are not building homes fast enough to even make a dent in the supply problem.
“Current new-home sales rates are less than a third of what would normally be needed to keep up with the current population growth in the area,” Orr said. “Census estimates show that between 2010 and 2012, the combined population of Maricopa and Pinal counties grew by 2.9 percent, while the number of dwelling units – both owned and leased – grew by just 1 percent. Tight lending standards and a shortage of construction labor are two reasons for this.”
Click here to view Orr’s entire report for June.

Kristena Hansen covers residential and commercial real estate.