The rapid increase in median single-family home prices in metro Phoenix over the past several months is slowing down, an Arizona State University report issued Thursday confirms.
Rapid rise in home prices slows
Although price increases have slowed recently, median sales prices for most types of homes are up compared with a year ago. Median home price by sale type:
Source: Arizona State University
The median price increased 2percent from May to June, the report said. Taking a longer view, the median price is up 29percent from June 2011.
The slowdown in price appreciation was coupled with a drop in home sales, primarily because of a limited supply of properties for sale, said the report's author, Mike Orr, director of the Center for Real Estate Theory and Practice at ASU's W.P. Carey School of Business.
Foreclosure activity also is dropping, Orr said, with no "shadow inventory" in sight.
"This market remains extremely unbalanced, with far more buyers than sellers," he said, adding that the inventory of available homes not under contract as of July 1 was 9,000 units, or 18 days' worth of inventory, and that 78percent of those were priced above $150,000.
Orr said the median price for single-family, detached homes sold in June was $150,000, compared with $147,000 in May and $116,000 in June 2011.
Extreme lack of housing inventory below the $150,000 mark fueled intense competition for lower-priced homes in June and left many would-be buyers disappointed, he said.
"A lot of them are losing heart and giving up," Orr said.
Buyer frustration in the existing-home market has been good for homebuilders, he said. New-home sales were up 39percent in June compared with a year earlier, and permits for single-family home construction were up 49percent.
The increase in demand for new homes was so fast and furious that it caught many homebuilders off guard, Orr said. Some are still scrambling to find available land and construction labor to cash in on the explosion in buyer demand.
The existing-home market remained dominated by investors in June, Orr said, with the percentage of metro Phoenix homes purchased with cash increasing to 38.4percent, up from just 8.3percent in June 2007.
The potential danger to investors is that there now are so many investor-owned homes for rent, it is becoming difficult to find credit-worthy tenants to occupy all of them, he said.
"We're … seeing an unusual number of large companies buying up single-family homes to turn into rental properties, and they may wind up having to lower their standards for tenants' credit ratings, in order to keep the homes occupied," Orr said.
Some home investors have begun to exit the Phoenix market, Orr said, but there are plenty of others ready to replace them.
"On the seller side, most homes priced below $250,000 are attracting a large number of offers and often exceed the asking price," he said.
Those offers are coming from both investors and traditional buyers, but sellers have been favoring investors, who usually pay cash, Orr said.
"The situation for the average homebuyer remains dire, despite low interest rates and historically cheap prices," he said.
By J. Craig Anderson, The Republic|azcentral.com aug 10, 2012
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