We recently had the opportunity to attend a market report presentation by Michael Orr of the Center for Real Estate Theory and Practice at ASU. He highlighted market observations through the month of June of this year. Here is a quick synapsis of some of the important observations:
Sales of single family homes fell 11% from June 2013. However, this overall fall in sales is a result of some sectors of the market increasing and some sectors decreasing. Overall, we saw the increases and decreases in the areas we would like to see them:
Single family homes sales increased year-over-year in these sectors of the market:
- normal resales (up 4%)
- new homes (up 5%).
Single family home sales decreased sharply year-over-year across these sectors:
- investor flips (down 43%)
- short sales and pre-foreclosures (down 71%)
In other words, investors are less active in the market, allowing buyers who actually want to live in a home a better chance of purchasing a home, since there are less cash investors they are competing against. And, the fact that distressed properties are disappearing from the market enables a more complete market recovery.
Compared with June 2013, the median sales price was up 11% (from $190,000 to $211,000) and average price per square foot had a gain of 10%.
The market has completed its rebound from the artificially low prices that prevailed between 2009 and 2011 with pricing now close to the level that it would have attained if it had increased from 2000 in line with the Consumer Price Index (CPI.)
In June, 11.9 % of home purchases in Greater Phoenix were by second home buyers – down slightly from 12.8% in 2013.
Demand has been much weaker since July 2013. “We’re in an 11-month slump in demand,” said Orr, the director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business at ASU.
He indicates that we may soon see the slump in demand impacting pricing: “There is always a long delay – typically nine to 15 months — between any change in the market and the resulting change in pricing.”
Supply, which had been climbing since July 2013, and is up 59% from a year ago, actually dropped 5% in the month of June. Mike Orr considers this weakening of supply to be a “modest sign” of improvement for sellers.
Another good sign: Orr also noted that lenders are beginning to move in the direction of easing up on underwriting restrictions.