Just a short year ago, 2013, Phoenix was facing a chronic shortage of houses for sale with surging pricing.
Now, one year later, the opposite is true. Supply has stabilized with 64 percent more listings than a year ago according to the Arizona State University’s housing April housing report.
Prices has cooled even slipping 5 percent in the first 2 months which has now come back, however demand continues to be VERY weak except for luxury homes. Sales of homes over $500,000 were up 11 percent. But the gain in luxury sales was overshadowed by HUGE declines at the lower end, which dropped a whopping 20 percent over all.
“The underlying key problem for entry-level and mid-range housing demand is a lack of household formation. This has been dropping for a long time due to a number of factors including unemployment, falling birth rates, lower net migration and greater home sharing especially among millennials,” said Michael Orr, the report’s author and the director of ASU’s Center for Real Estate Theory and Practice. “If household creation were at the normal long-term average, we would quickly have a housing shortage here in Greater Phoenix.”
With persistent weak demand and the slow summer season approaching, Orr said the price recovery that took place in March could eventually be erased.
Orr states, “It is highly probable we will see pricing fade again during the summer months, when the luxury, snowbird and active-adult markets go relatively quiet. We may still be looking at little to no annual price appreciation by the end of the year.”
Lenders, also feeling the brunt of weak demand, have been hurting for business in recent months. Orr suggested this may finally push lenders into easing their ultra-tight lending restrictions, which have been exacerbating the demand problem.
Between 2015 and 2019, Orr said the Valley may also see an uptick in demand from boomerang buyers, meaning those who lost their homes to foreclosure or short sale and have finished waiting the required four to seven years to be able to qualify for a mortgage again.