If you read my blog you know I have great faith in the analysis that Michael Orr does in the Phoenix housing market. He has access to MLS data and is right on top of the local market.
The sluggish Phoenix housing market just got a pleasant surprise. New figures show a sudden uptick in buyer demand, with a significant boost in homes under contract since late January.
“I do not think this has anything to do with the crowds that came in for the recent Super Bowl in Arizona, but that is coincidentally when we started to see this rise in demand,” says Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business at Arizona State University.
Orr looked at statistics from the Arizona Regional Multiple Listing Service (ARMLS) for his W. P. Carey School of Business analysis. In 2014, the Phoenix housing market had relatively low demand, and sales activity even dropped 14 percent. However, the new ARMLS numbers show this year has already brought in more than the usual seasonal uptrend in almost every price range.
These numbers are for non-distressed homes under contract in Maricopa and Pinal Counties, on a typical day in late February 2015 versus the same day in 2014:
• under $150,000 – up 7 percent
• $150,000 to $250,000 – up 35 percent
• $250,000 to $400,000 – up 38 percent
• $400,000 to $600,000 – up 33 percent
• $600,000 to $1.5 million – up 12 percent
• more than $1.5 million – down 10 percent
Overall, non-distressed listings under contract are up 26 percent. Orr says luxury homes aren’t seeing as much impact from recent changes in market conditions, but entry-level and mid-range homes are attracting far more buyer interest.
“The reasons for these increases in the Phoenix housing market include: 1) that lenders have started to relax their previously tight loan-underwriting guidelines and 2) that more people who went through foreclosure or short sale are now able to return to home ownership,” explains Orr. “These changes largely affect the lower and middle ranges of the market.” I will add a third point to Michael’s reasons. The reduction of mortgage insurance in FHA loans.
Orr calculates that, in 2014, the median single-family-home price in the Phoenix area went up 5.4 percent. He now expects 2015 to be a much better year for home sellers, if the new trend continues. However, he does have one note of caution.
“The Phoenix area was already dealing with a relatively low supply of available homes for sale before this uptick,” said Orr. “If the higher-demand trend continues for several months, then that tight supply could become a bigger issue.”
This is all good news for the Phoenix Arizona economy in general. That’s good news because housing still drives this economy.
“Real estate is to Arizona’s economy like oxygen is to the human body,” said Ioanna Morfessis, the state’s leading growth expert and founding CEO of the Greater Phoenix Economic Council. “We want to build a more diverse and robust economy, but we need a strong housing industry in this state and the whole value-supply chain it brings from high-paying jobs to vendors.”
Yes we need diversity in our economy…new startup companies…young blood. We want technology jobs….like the Mesa technology corridor. We need innovation….however we will always need real estate.