“Per Michael Orr of the Cromford Report, “Soft” has been the resounding theme of the Phoenix-area housing market throughout 2014.”
The slowdown is directly related to investors leaving the Phoenix market and how slowly the regular buyers have been to pick up the vacuum.
Metro Phoenix, with its staggeringly low prices and flood of foreclosures, was one of the first markets in the country to experience the investor buying spree, starting around 2011. Investor activity peaked in July 2012, making up almost 40 percent of all Valley home sales when the median single-family price was a mere $149,000, according to Arizona State University research.
That high investor demand — combined with the short supply of homes for sale, foreclosures abound and all-time-low mortgage interest rates for regular buyers — shoved the market into a frenzy as prices climbed steeply.
Investors left as the bargains wound down and regular buyers have been slow to make up for the loss of activity.
In April, single-family sales Valley wide were up about 9 percent from March but down 16 percent year-over-year, the report said.
“New home sales were down 12 percent from last year and because very few investors buy new homes, we can conclude that something significant has changed in buyers’ motivations,” said Michael Orr, the report’s author and the director of ASU’s Center for Real Estate Theory and Practice.
However, Orr said demand from regular buyers is more pent-up rather than nonexistent, and the solution remains mostly in the hands of lenders.
“It would not take a huge change for demand to perk up,” Orr said. “This could be: some more large lenders offer loans suitable for entry-level buyers with FICO scores of 620 and above; a greater degree of forgiveness by loan underwriters for people who went through foreclosure or short sale; 10 percent more millennial deciding to buy than rent.”
This all bodes well for seller financing. If a seller is willing to finance, it will open up a huge pool of buyers otherwise on the sideline.