Low Inventory Affecting Home Pricing
A recent housing report released by Arizona State University’s W.P. Carey School of Business shows Phoenix-area home values rose 29 percent during the last year. But for homeowners in select spots, the news can be a bit deceiving.
According to Carlie Back, Realtor at Keller Williams Lifestyle Realty, changes in values vary from city to city, among neighborhoods and even from street to street.
“For example, homes in Maricopa and Casa Grande were down so low at the bottom that they have seen a large percent increase, even though they are still priced low,” she said. “Places like Tempe and Scottsdale and certain stable neighborhoods did not see as dramatic a drop, so the percentage increase is not as large.”
Consequently, a total combining the Valley’s averages creates what Back calls a “watered down” figure.
Overall, in the South Mountain and Laveen area, she said demand remains high for a limited supply of available homes. As a result, multiple offers on properties for sale is common, with some buyers even paying more than the appraised value. This has led to fewer investors who were attracted to opportunities offered by the area’s high number of distressed properties.
“The lower the price, the more it’s bouncing back,” Back said. “Anything under $100,000 right now is going to get sight-unseen cash offers.”
Sales have also picked up in the high-end market, where Back has seen several closings on homes in the $450,000 – $575,000 range, include one that previously sat more than a year.
For homebuilders that weathered the financial storm, a lower home supply means some increased attention from buyers for new builds. Back said Beazer Homes’ Desert Rose and Toscana communities have received significant interest.
But, for new homebuilders, adding more houses isn’t as easy as it might seem.
“When the market crashed, all the tradespeople went to other places,” Back said. “The new home market is going to come back quickly. It’s just going to take time to get building again and find tradespeople.”
Victor Vidales, owner of RE/MAX New Heights Realty, has seen increases as much as 60 percent in the lowest price ranges, while homes between $100,000 and $150,000 have gone up as much as 30 percent. He too cites low inventory and high demand as the cause.
“We’re seeing a lot of improvement in values, but I don’t know how long it will last,” Vidales stressed. “In the last few weeks, buyer and agent activity has slowed. So we’re still seeing homes selling over the list price, but nothing like we saw a few months back.”
Thanks to population growth, affordability and low interest rates, Vidales believes the supply shortage could continue for several years. He points to U.S. Census numbers that show a significant drop in housing construction. Between 2009 and 2011, an average of 647,600 houses were built nationwide – and that number has declined every year since.
In comparison, between 1968 and 2008 at least 1 million homes were constructed each year.
The Joint Center for Housing Studies at Harvard University estimates between 1.18 million and 1.38 million housing units per year are needed to meet the demand for new household development that will occur between now and 2020.
According to Vidales, in Laveen alone, there is currently only 70 homes listed for sale. And during the last two months, 119 homes sold.
“If you average that out, it’s 60 homes a month,” he said. “So there’s a little over a month’s supply of homes in the Laveen market. These are historic lows.”