Phoenix-area housing prices on the rise

More metro Phoenix homeowners may soon be able to sell for a profit, albeit a small one, as home prices in the region continue to rise.

Arizona State University's latest real-estate report shows the median home price in the Phoenix area climbed again in April to $140,000 -- 25 percent higher than the year before.

Helping push up prices is a limited supply of homes for sale and a growing pool of buyers. If those trends hold, the outlook is for home prices to keep rising, which could be good news for many owners who for years have owed more than their houses have been worth.

The report highlights some significant movements in the market:

Fewer houses for sale: Supply has dwindled as a smaller number of foreclosure homes go up for sale, and the number of homes on the market is at its lowest since the pre-2007 boom. There are about 8,800 houses for sale without a pending contract from a buyer. In 2008, there were more than 50,000. The total number of sales was down, as well, about 12 percent lower than in April 2011.

Declining foreclosures: The number of foreclosures was down 62 percent from a year earlier, to approximately 1,600.

More new-home sales: After years of stagnation, closed deals on new-construction homes were up 43 percent, to about 900, which is still far from the boom years.

"If prices continue to climb, more homeowners will be enticed to sell," said Mike Orr, real-estate analyst with ASU and publisher of the "Cromford Report," a daily analysis of metro Phoenix home sales. "Some homeowners might be surprised how much their values have gone up since last year."

Regular home sales, between a homeowner and a buyer who plans to live in the house, are up 57 percent from last year, but still less than half of all sales.

Metro Phoenix's supply of homes is so low that bidding wars have become the norm. Orr started a survey among real-estate agents to track how competitive homebuying is in the region.

So far, the most competitive purchase he has documented was a home sale with 76 bids in Chandler. Of the offers, at least 65 came from regular buyers.

Regular buyers have been scarce in the Phoenix-area market in recent years, with few new residents buying and existing homeowners unable to sell their houses to move up.

But the winning buyer of the Chandler home was one of 11 investors. These buyers, who offer cash up front without contingencies, often still win the house.

"Regular buyers definitely outnumber investors trying to purchase houses now," Orr said. "But investors continue to win out in bidding wars because they can pay cash and take the home off the lender's hands without an appraisal."

The number of homes for sale in metro Phoenix is so low because the slowdown in foreclosures has left fewer lender-owned and short-sale houses on the market. Those types of sales have been among the most common for the past three years.

Many regular homebuyers and investors had been waiting for home prices to hit bottom before trying to buy. After several years of fluctuations, most market-watchers now agree Phoenix home prices hit that bottom in August.

Potential buyers seeing the rapid run-up in home prices during the past few months are now rushing to try to buy, Orr said.

But with supply at a low and little sign of a coming jump in new foreclosures, it's not clear there will be enough homes for sale to meet demand.

The only way supply can truly increase and slow the bidding frenzy for houses is if regular homeowners can start to sell again for a profit, even a small one. When they can, more will put their houses up for sale.

Rob Shaw, a Phoenix-area real-estate agent with HomeSmart, said that there are regular homeowners who can now sell for a profit but that appraisals aren't keeping up with rising values. That means traditional buyers, who must get an appraisal to secure a mortgage, may not be able to close the deal.

"We are encouraging sellers to consider marketing their homes to cash-only buyers to avoid having to get an appraisal," he said.

Metro Phoenix's median home price is back to the mid-2002 level, which means the values still are far from rebounding to boom prices. But many of the area's current homeowners who bought in 2002 or earlier may be able to sell for a profit now.

The big question for the market is where buyers and sellers will find a balance. As prices rise, more owners will sell. But if prices rise too much, buyers will lose interest or no longer be able to bid.

"Phoenix is a volatile housing market," Orr said. "I always tell people we are the dot-com of real estate. When the market is doing well, people jump in, and when it goes bad, panic sets in fast."

by Catherine Reagor - May. 31, 2012 11:12 PM The Republic | azcentral.com


Phoenix-area housing prices on the rise