New Phoenix housing market numbers define new normal
The Phoenix housing market has been enjoying a renaissance of sorts since the 2011 recovery, but the latest real estate report from Arizona State University is showing a significant and sustained downturn to single-family-home sale prices.
Experts say this is indicative of a noticeable shift from a sellers to a buyers market while luxury real estate — generally thought of as any single-family homes priced at $750,000 or better — remains relatively untouched by the recent decrease in valuations.
February 2014, which is the latest data available, marks the first time the median single-family-home sales price went down for a second month in a row since the 2011 housing rebound, the ASU report shows.
Phoenix-area home prices started rising quickly after hitting a recession low point in September 2011. Price increases began slowing down in July, with the market experiencing two monthly drops in the median single-family-home sales price this January and February — totaling about 5 percent.
For real-time market stats, see this page.
Not headed for meltdown
Center for Real Estate Theory and Practice Director Mike Orr says the trends are noticeable but he does not believe another meltdown is on the horizon.
“We do have a serious slowdown in sales in general,” Mr. Orr said in an April 8 phone interview. “This is not effecting the upper end of the luxury market, although that depends on where you count luxury.”
Mr. Orr points out home-sales activity was 26 percent below this February compared to February 2013.
“Despite the large price gains since last year, the total dollars spent on homes dropped 16 percent between last February and this February,” he explains. “This is the weakest February in four years.”
But the median single-family-home sales price was $195,000 in February, still up about 15 percent from February 2013, according to the report.
Mr. Orr says selling homes does not have the same audience it did just a generation ago.
“I think what is happening is that we have more people wanting to rent rather then buy,” he said noting the idea of the suburbs doesn’t spark the same sense of pride in property ownership it did for the Greatest Generation or Generation X.
But the idea of home ownership is not what luxury real estate is about — instead its about how much can be bought, and in Arizona there are a lot of good bargains.
“If you start counting from $500,000 to $1 million it is better — we have some 38 homes in escrow that are over $1 million,” he said. “Paradise Valley is 31 percent of that number.”
New-home sales are now suffering, which Mr. Orr points out that those sales a few short months ago were the stars of the market. New-home sales fell 23 percent from last February to this February, according to the report.
Multifamily permits exceeded the number of single-family permits in both December and February, which is very rare, according to Mr. Orr.
In February, the percentage of residential properties bought by investors was down to 20 percent from the peak of 39.7 percent in July 2012, the report states.
“I do think the last piece of the puzzle is the first-time homebuyers because they are not back to the numbers we would expect,” he said.
“We have had the recovery; it is over, but we are not going to take off again until we get first-time homebuyers back into the market.”
Luxury marketplace snapshot
Walt Danley of Walt Danley Realty says his company remains a top performer but expects better numbers as the marketplace — luxury or not — finds its new normal.
“If we are the star of the market, that is not reflecting that great on the market itself,” he said in an April 9 phone interview.
“I think we are doing OK. I think at the end of 2013 we had a very strong January and February, but when we got into typically our selling season things have slowed down.”
Typically March and portions of early April are strong for luxury real estate brokers, experts say.
“I know that inventory is up year over year; in Paradise Valley we are about 21 percent above the number of active listings in inventory, but that inventory is not abnormal,” Mr. Danley said. “What is abnormal is the lack of buyer demand.”
Mr. Danley says he has noticed a “lack of sense of urgency in the buyer pool.”
“It has been a long time since I can remember buyer expectations and seller expectations so dramatically different,” he said.
“The reality is the market has shifted to a buyer’s market — it is not doom and gloom, but it is certainly not as strong as it was last year.”
Robert Joffe of Prudential Arizona Properties says listings are strong and seller demand lukewarm. But the buyer population is growing.
“We have changed from a seller’s market to a definite buyer’s market,” he said in an April 8 phone interview.
Mr. Joffe says the only thing investor buys did for the overall Phoenix housing market was make people feel better about the market itself. He says it had little to do with the overall health of the marketplace.
“The only thing it does or the role it (investor activity) plays is in the amount of sales that happen,” he pointed out.
“They (investors) help the news, which makes everyone feel very good about things. It just helped everyone feel good, but I don’t think everyone believed that everyone was able to buy into it.”
The soft market of 2014 is a relative surprise to Mr. Joffe, he says.
“I am quite surprised that this year has not been consistent with the last two years,” he said. “I would have thought our market would have been much better than it already is.”
Sandra Wilken of Engel & Volkers Sandra Wilken Partners says she and her staff have been busy since the start of 2014, but many of her clients are from out of state and, in more and more cases, they are from out of the country.
“Over the last few month we are getting buyers from our offices in California; we are now attracting the higher-end buyer who is looking at luxury real estate here in Arizona,” she said in an April 8 phone interview. “We are seeing activity in all price ranges.”
Ms. Wilken agrees the Phoenix metropolitan area is a buyer’s market once again.
“Now it is more of a buyer’s market, but if it is a quality home we are still seeing it sell for a smaller price,” she said of the luxury real estate game.
“We represent from $300,000 to $18 million and everything in between … what we find is because we cater to so many out-of-state and out-of-country customers we stay nice and busy through Easter.”