The "rebound" of home prices in the Phoenix area might be over, according to the monthly real estate report from Arizona State University's Center for Real Estate Theory and Practice.
According to the report, "the market conditions suggest prices will struggle to make any further upward progress in 2014."
One reason: The researchers clocked the second-lowest level of demand in 14 years (the absolute lowest was in 2008).
The report released this week uses the information from sales in January, so with January typically being the weakest month of the year in sales, the whole report's pretty bleak.
The median single-family-home sales price dropped for the first time since summer. From the report:
Prices were lower in January than in December. Through one month does not make a trend, the market conditions suggest prices will struggle to make any further upward progress in 2014. With February through June the strongest part of the year we may yet see a little forward movement in pricing, but it is likely to be tentative at best. The real test will come in the second half of the year which is likely to see lower prices unless demand takes a distinct turn for the better.
The monthly median sales price for single family homes was $199,000 in September 2013. Our January figure of $195,000 suggests we may be looking at little to no annual appreciation in 8 months time if prices stay close to their current level.
Given the last decade of the real estate market, it might seem odd that prices would be stagnant, possibly for a year, but check out this nugget of information from the report:
Pricing is back to the level that it would have attained if it had increased from 2000 in line with the Consumer Price Index. Further significant increases are unlikely without some growth in demand.
A press release from the W. P. Carey School of Business says it's "as if the recession and recovery had never happened."
The report says it's not just the investor demand that's down, but demand from ordinary buyers is down, too.
Also, after last month's report, we pointed out that the research shows Millennials aren't buying homes in the Phoenix area. This report includes more information about that:
Millennials are increasingly important to the housing market as they enter the workforce in larger numbers while baby boomers start to retire. However there are many reasons why they are not participating as home owners as strongly as previous generations did:
• They have witnessed an unusually negative period for home ownership 2005-2010
• They appreciate the flexibility of renting because they change jobs more frequently
• They carry a larger student debt load than previous generations, impacting their debt-to-income ratios and thus their ability to qualify for home loans
• Many tend to prefer dense urban lifestyles rather than the suburban lifestyle which dominates central Arizona and was preferred by earlier generations.
• Many are deferring home ownership to later in life, just like owning a car, getting married and starting a family
• Many continue to live with their parents or share with friends
Both millennials and those recovering from a distressed sale represent possible pent-up demand, but at the moment the realized demand is far lower than expected. A larger percentage of the population than normal is choosing to rent, either because it fits their lifestyle or from financial necessity, having neither the credit history nor down payment needed for a home purchase. Indeed competition for rentals is much stronger than competition for homes to buy. If it persists, this could lead to rent increases over the next two years.
People who lost their homes to foreclosure or short sale after the housing bubble burst are also shying away from buying -- more so than expected, according to the report.
Click here to check out the report for yourself.
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