Home sales are slowing in ArizonaDate posted: 2/8/14 02:30:00 PM
After a few solid years of positive gains, the Phoenix housing market looks to decline in 2014, according to a report from Arizona State University's W.P. Carey School of Business.
Alongside a major decline in foreclosed properties available for purchase, the city has experienced a large upswing in median home prices, which has turned away some of the investors that helped carry home sales for the past few years.
Mike Orr, the director of ASU's W.P. Carey School of Business, said the state's lethargic housing market in 2014 isn't an anomaly.
"We're seeing growing evidence the housing slowdown is also being experienced in other parts of the country, including Southern California," Orr told Arizona ABC affiliate KNXV. "If current conditions persist in the Phoenix area for several months, downward pressure on pricing will become hard to resist."
Orr said investors have shied away from the market because the rise in values has made it harder to turn a large profit. He also pointed to a recent lack of demand from Canadian investors due to a less favorable exchange rate.
Orr called it "over-simplistic to write this all off on investors." He also said you couldn't blame the lethargic housing numbers on the weather like some other places around the country that experienced snowstorms and icy temperatures.
"Demand is really getting quite low," Orr told The Wall Street Journal. "Each month it seems to get a little worse than I expect."
Phoenix housing by the numbers
Citing his report from the W.P. Carey School of Business, Orr noted Phoenix' sales of homes priced less than $150,000 plummeted 47 percent year-over-year in December. The percentage of residential properties bought by investors also declined to 19.3 percent in December 2013, a plunge from nearly 40 percent in the summer of 2012.
"We are seeing a big drop in demand compared with the last two years, and there are ominous indications of a softening market when we dig deep into the numbers," Orr told KNXV. "Sales of single-family homes were down 17 percent from December 2012 to this December and townhome/condo sales were down 11 percent."
While rising prices have kept some investors on the sidelines, the upswing in value has been a boon for homeowners who had been underwater on their mortgages. Phoenix homeowners surfacing from an underwater mortgage might want to consider a home equity line of credit, which asks them to put their house down as collateral for a line of cash to use on home improvements, car payments or student loan repayment.
Competition is hot
Donald Tomnitz, CEO of D.R. Horton, told The Wall Street Journal that he doesn't expect Phoenix home prices to go much higher in 2014.
"Pricing ran up dramatically and quickly in Phoenix. It's plateaued," Tomnitz said. "That's a lot of competition for all sellers. It's a good market for us, but it's not a great market - and it's going to be weaker in 2014 than what it was in 2013."
Renting is also gaining momentum over buying in the area, and younger households are primarily responsible for propelling the rental market, according to Orr. Prospective young buyers can't afford to make a purchase, aren't able to acquire a loan or simply aren't interested in buying.
"There's no shortage of rental demand," Orr said. "Any rental that is reasonably priced is getting multiple people applying."
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