Phoenix-Area Housing Market in a Nearly Yearlong Slump
The Phoenix-area housing market has slumped for nearly a year now, according to the latest real estate report from the Center for Real Estate Theory and Practice at Arizona State University.
"Demand has been much weaker since July 2013 and as yet shows little to no sign of recovery," the report states. "Activity by first time home buyers remains stubbornly and unusually low and is not compensating for the large reduction in investor buying that prevailed until July last year."
We asked Michael Orr, the director of the Center for Real Estate Theory and Practice, what he thinks it's going to take to end this 11-month-long slump.
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"A resurgence in demand from the first time home buyer, especially for buyers aged 20-35," Orr tells New Times.
The ASU real estate reports have explained in recent months that millennials haven't purchased homes at a high rate, which has been increasing rents, as predicted. The report says average rents have increased about 6 to 8 percent over the last year, which is "the strongest upward trend in 14 years."
Even so, the supply of cheap houses to buy is very low, in part due to low rates of foreclosures and short sales.
The report does point out some positive signs, including more people who could eventually become first-time home-buyers. One such sign is increasing "household formation" in the U.S., according to the Census Bureau. (The stereotypical example of household formation is the adult kid moving out of his parents' basement to buy or rent on his own.)
The household creation rate is increasing nationwide, which usually corresponds to an increased demand for home-buying in the Phoenix area, according to the report.
"July 2012 through February 2014 was the longest unfavorable trend in household formation that we have seen in recent history and that trend now appears to have broken," the report states.
So maybe it's time for a turnaround. Here's what else can be found in the report's outlook on the real estate market:
The Greater Phoenix housing market has been in a slump for 11 months now but the situation is starting to show a few modest signs of improving for sellers. During the entire spring selling season (March through June) sales were much lower than last year. However the size of the drop was lower in June than the previous three months. Usually when demand is this weak, supply starts to grow, as it did famously in the second half of 2005 and throughout 2006 and 2007, heralding the collapse of the housing bubble. In the summer of 2014, supply is instead weakening. It appears that the lack of enthusiasm among buyers is spreading to sellers rather than causing them to panic.
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