Why Phoenix is in a housing slump (again)
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Michael Orr
- Tim Gallen
- Reporter-Phoenix Business Journal
Real-estate guru Michael Orr finally has confirmed what I’ve been experiencing all spring and summer: the Phoenix housing market is in a slump.
That’s what Orr lays out in his latest monthly report that shows the housing markets in Maricopa and Pinal counties have slowed dramatically in the past year.
Sales of single-family homes were down 11 percent year-over-year in June, according to the report.
But it isn’t just June. Sales activity has been trending downward since the spring, which is when my wife and I first put our home on the market.
“We’re in an 11-month slump in demand,” said Orr, the director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business at ASU.
In other words: The Gallens couldn’t have picked a worse time to try to sell.
Even with slow sales activity, the median single-family home price still managed to tick upward, rising to $211,000 in June, according to the report. That’s up 11 percent from $190,000 the previous June.
However, Orr added that there are a few positive signs that demand may begin to recover in the latter half of the year. Still, any help on pricing is unlikely until next year.
“There is always a long delay – typically nine to 15 months — between any change in the market and the resulting change in pricing,” said Orr. “Meantime, we may see a little downward correction, not a bubble bursting, as some have predicted.”
Other encouraging signs for the market in June, according to the report, were an uptick in new-home sales and the highest monthly total of construction permits for new single-family homes in more than two years.
One potentially good sign for people who want to buy a home to, well, actually live in it, is that investors seem to be leaving Phoenix, according to the report.
The percentage of Phoenix-area residential properties purchased by investors fell from a peak of nearly 40 percent in July 2012 to 14.4 percent this June. That’s near the historic norm for Phoenix, according to the report.
The departure of investors is coinciding with an increase in new household formation.
“We are finally seeing a change in the trend of low household formation,” Orr said. “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.”
Still, he states in the report, the supply of homes for sale — especially at the less expensive end of the market — remains low.
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