Thursday, June 28, 2012

Mixed bag: Investors spark local recovery

Mixed bag: Investors spark local recovery


A market overview from a longtime Phoenix real-estate expert, who recently became an analyst, Mark Stapp, director of the Master of Real Estate Development program at Arizona State University's W. P. Carey School of Business.

Question: Is metro Phoenix's housing market recovering?
Answer: When you look at the statistics, it's obvious the housing sector is recovering. My concern lies specifically with how it has recovered. It is investors who dug us out of the hole, not homeowners. We currently have a single-family housing stock that is about 30 percent renter-occupied. Normally, we are at about 10 percent. Our full recovery will come when homeowners can buy existing homes, and that requires more appreciation at all price levels, and more importantly, the ability for homebuyers to get a mortgage.

Q: Are you concerned the low supply of homes for sale has made bidding wars among investors and regular buyers the norm now?
A: Yes, this puts upward pressure on prices, which is good and bad. It is good because it helps resolve the "underwater" home-value issue that persists. It is bad because it impacts affordability. Unless we see significant wage growth, appreciation at current rates will not be sustainable. It's impossible to separate regional economic development from the health of the housing market.

Q: Do you think the 30 percent-plus increase in home prices since last year is sustainable?
A: No. But, this type of appreciation will continue for a while, especially in certain sub-regions. It is important that appreciation does continue. As prices rise, as long as demand persists, new homebuilding will become more feasible, and volumes will increase, and that will start to dampen some of the appreciation.

Q: Are there now too many investor-owned homes in metro Phoenix?
A: I'm concerned about the reason why there are so many renters. Many are not renters by choice. For every foreclosed home, there is a family that has faced stress. That impacts the entire community. We cannot afford, as a community, to be seen simply as a place to buy cheap real estate. In the long run, we need to build on community infrastructure that makes the Phoenix metro area a highly desirable place to live.

Q: What about all the vacant homes? Are they finally filling up?
A: Yes. Homes that were marginal in quality and location become more desirable as prices increase. Some houses may never be desirable again or have physically deteriorated to the point they may need to be demolished. However, I don't see that problem as much in this metro area as in others.

Q: Do you think the real-estate industry has changed since the boom and crash?
A: The industry has been dealing with a down cycle for six years. The shift resulting from socioeconomic and demographic changes in our population is very significant. Now we need to pay closer attention to how these changes impact what we do, how we communicate about what we do, the value proposition we offer and the design of our products. You can't simply pick up where we left off six years ago. The market is more competitive, and buyers' attitudes have shifted. Demand has changed, so the developer, to be successful, must better understand how buyers have changed and what they want and need.

To inquire about buying, selling, leasing and managing residential investment properties, please contact Mr. Payam Raouf, President/Designated Broker at Arizona Property Management & Investments at (888)777-6664 ext 109. Thank you.

Valley home values soar 32 percent in past year

Posted: Thursday, June 28, 2012 6:39 am
Valley home prices have skyrocketed by nearly one-third in the past year as a growing shortage of units for sale keeps boosting housing values. Median sales prices were 32 percent higher in May compared with a year ago, according to the W.P. Carey School of Business at Arizona State University. Prices were up 9 percent since April, $147,000.
 
The recent trend of soaring prices is likely to end as summer settles in as people are less willing to move in 110-degree temperatures, said Mike Orr, a real estate expert at ASU.
“We’ll still see a pretty healthy transaction rate, but I think we’ve got to let people catch up a little bit on pricing and it wouldn’t surprise me if we went sideways on pricing for a month or two,” Orr said. “After all, there is a limit.”

The number of homes on the market dropped to an unusually low 8,550 on June 1. That’s down 50 percent in one year. The tight supply has led to bidding wars and buyers getting flooded with offers.
One Chandler home garnered 84 offers and a house in Glendale had 95 — only to sell for 17 percent higher than the asking price.

“If I was in the business of trying to buy a house, I’d focus on going to a new subdivision,” Orr said.
The East Valley remained the hottest portion of the market for new homes. Gilbert held the record with 187 houses, followed by Chandler’s 49 and Mesa’s 49. Phoenix logged 60 new homes in May.
However, overall home sales fell nearly 6 percent because of a short supply of listings.

Orr said looming economic woes could dampen the market, but he wouldn’t predict the market’s performance more than a few months ahead. Even if interest drops among buyers who plan to live in the home they purchase, Orr said strong investor demand will fill that gap.

New home construction shot up 57 percent in the last year as homebuilders are responding to the shortage.
“They’ll go as fast as they can but that’s not very fast because of the shortage of labor,” Orr said. “It’s not clear how quickly the labor shortage can be filled.”

To inquire about our sales, leasing and property management services, please contact Payam Raouf, President/Designated Broker of Arizona Property Management & Investments at 888-777-6664 ext 109. Thank you.