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ASU: Phoenix-area home prices surge 35%

Despite a minor, yet expected, decline following the bustling holiday season, metro Phoenix home prices continued on their steady incline during the first month of 2013, surging 35.3 percent year-over-year, according to Arizona State University’s latest housing report released today.

In actual figures, that’s a median single-family home price of $163,000 in January — up from $120,500 a year ago, the report said. The average price per square foot — a key metric used by Realtors — climbed by 28.5 percent to an average $106.20.

Michael Orr, a real estate expert at ASU’s W.P. Carey School of Business and author of the report, said the price gains are sure to stay strong through the spring when home-buying season kicks in.

“Pricing is almost always weaker in January, but February signals the start of peak buying season that lasts until the end of June,” Orr said in the report. “Make no mistake – prices are going to rise significantly during this period. There is nowhere else for them to go until a significant new source of active listings enters this supply-constrained market.”

While this is good news for Valley homeowners, the cause of the dramatic price gains, as Orr stated, has subsequently sucked home buyers and agents into a quagmire that is unlikely to ease over the next few months.

The Valley is still facing a widespread shortage of homes for sale, a problem that has had a stronghold on the housing market for the past several months.

There were 13,093 active listings (that were not under contract) on the Arizona Regional Multiple Listing Service in metro Phoenix on Feb. 1. While that’s up 3.7 percent since Jan. 1, it was basically unchanged from a year ago, he said.

Additionally, the shortage continues to be most severe in the lower-price ranges, where demand is also the highest. About 77 percent of the inventory on Feb. 1 was priced above $150,000. That’s only a 43-day supply, which is way below normal levels but still significantly better than the 18-day supply Phoenix saw in June.

The supply problem thus instigated a 12.8 percent drop in sales from December, he said.

“We still have a long-term supply shortage with only about 50 percent of the active listings (without contracts) that we would expect to see in a normal market,” says Orr. “Consequently, the trend is for prices to continue to rise across most sectors. Most homes priced reasonably below $500,000 continue to attract multiple offers in a short time. Sellers are firmly in control.”

Foreclosures went up slightly in January, but Orr said this is a normal post-holiday season bump that has since been reversing.

Cash and large, corporate investors have thus been less active as the downward trend in both foreclosures and short sales continues, he said. In fact, investor purchases throughout Maricopa County fell from 39.2 percent of all sales in January last year to 31.8 percent in January this year.

“Some commentators have suggested that the presence of large investors is causing the recent price rise,” Orr said in the report. “This vastly exaggerates their effect on our market. Large investors account for only around 8 percent of purchases, and if they disappeared overnight, there still would not be enough homes on the market to satisfy the small investors, second-home buyers and regular owner-occupiers.”

Source: Phoenix Business Journal – K. Hansen

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