Phoenix Area's Multimillion-Dollar Home Sales at Best Rate Since 2007
Considering Phoenix was especially hard-hit by the housing crisis, there's always something interesting to be found in the monthly real estate reports released by Arizona State University's Center for Real Estate Theory and Practice.
Demand for homes has been fairly low, but people spending more than $500,000 on a home appear to be doing just fine.
From the report:
Luxury homes over $500,000 grew their market share from 23% to 26% of the dollars spent while the lowest-priced homes under $150,000 fell from 16% to 11%. The demand for luxury homes has been stimulated by strong advances in the stock market and a significant increase in the availability of jumbo loans together with terms and interest rates that get more attractive the larger the loan amount. The demand above $1,500,000 has been greater in the first four months of 2014 than for the same period in any year since 2007. Demand from first time home owners remains subdued but did not deteriorate further.
In fact, the higher the dollar value, the better the sales are looking:
When we examine the price ranges from $500,000 to $1,500,000, demand has clearly dropped compared with 2013. However there is more money being spent on homes over $1,500,000 than we have seen since 2007. Homes over $3,000,000 are seeing their best sales volumes since 2008. Sellers should not get over-excited, however, as the available supply at these levels is also quite high and buyers have plenty of alternatives.
The author of the report, Center for Real Estate Theory and Practice director Michael Orr, writes in the report about why there's not much of a demand for lower-prices housing, and the reasons probably won't surprise you:
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. If household creation were to return to the normal long term average we would quickly have a housing shortage here in Greater Phoenix.
Again, the evidence points to a short supply of rentals, which, in turn, is likely to increase rent prices for Millennials or anyone else affected by the above-mentioned circumstances.
Got a tip? Send it to: Matthew Hendley.