Phoenix-Area Housing Market in a Nearly Yearlong Slump

Categories: News

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Bernard Gagnon
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.

See also:
-ASU Research: Millennials Not Buying Houses in Phoenix Area

"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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Follow Matthew Hendley on Twitter at @MatthewHendley.



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32 comments
Lucia Perry
Lucia Perry

Thanks, GOP! This is a "right to work (for less) " state :(

Eric Troje
Eric Troje

The out of state "flippers" have decided to invest in states other than Arizona is what I heard on CNBC yesterday.

Jesus Castillo
Jesus Castillo

Arizona your homes are cheap compared to here in cali good luck trying to get a home under $400,000

Josh Benson
Josh Benson

So housing prices not going through the roof in a short period of time is a slump?

Rodney Coty
Rodney Coty

Really only saw a slow right before summer until now. Starting to pick back up as people come back in town from vacation. There has been more inventory hitting the market. Buyers are being particular and trying to get the most for their $$. I think and hope we all got wiser from the bubble bursting...

Brett James
Brett James

"The report says average rents have increased an average of 6 to 8 percent over the last year, which is "the strongest upward trend in 14 years." - Yeah, who would want to buy anyways? You have an appreciating asset, tax deductions and fixed rent. What a bunch of idiots.

Kurt Kreiger
Kurt Kreiger

As long as people keep tryin to get 500k for a home worth only 150k. Yes.

Nicholas Gonzalez
Nicholas Gonzalez

Who gives a shit about owning a home. More and more people are realizing they don't really need to own. Especially with high prices for homes vs the stagnant incomes.

John
John

The price of my home located on the scottsdale/phx border has gone up about $13k in the last month

Charles M Erjavec
Charles M Erjavec

It's a good thing. Lenders have tightened up and a slow recovery should protect the market from crashing again.

Doug Cleland
Doug Cleland

Yes. Home of the $100 thousand dollar house.

Cris Cross
Cris Cross

What? The Chinese and Canadians aren't buying anymore. Man what a drag.

Joe Downs
Joe Downs

Richard Dickson using your data, that implies about a 5% compound growth rate in the price of homes over the last 43 years. That's supposed to imply a bubble?!? That's less than the average 10 year Treasury yield over that time. People with numbers... sometimes it's like giving a baby a samurai sword.

David Quijano
David Quijano

It's definitely cooled off. That's really not bad, though. People want houses to be expensive because for a lot of people, it is their only investment. But cheaper houses are better, overall, for the economy than expensive ones.

Richard Dickson
Richard Dickson

30% of the people in Arizona make less than $30,000 a year. You cannot buy a house earning slave wages.

Brian Kern
Brian Kern

Haha! Probably because it was being almost entirely driven by cash investors. The real estate industry is such a racket. Many sectors are bubbling like crazy right now, multi family especially. Our economy will take another tailspin sooner rather than later. My advice to anyone with a house is sell now while prices are still reasonably high. Shit ain't gonna be pretty the next time some bubbles burst.

Richard Dickson
Richard Dickson

All of the houses in the Phoenix area are overpriced! Look at the cost of living in the past. Look at the annual income versus the prices of houses....then compare that with today. We have been flimflammed for too long by sleazy real estate people.

getmeouttahere
getmeouttahere

Not surprised....what do you expect? Shitty Arizona jobs + shitty Arizona wages + high student loan and credit card debt = nobody can afford to buy houses, except cash-up-front investors. It does not help that Arizona's population has shrunk substantially since the Recession-That-Is-Really-A-Depression started, despite what the rah-rahs from the Real Estate Industrial Complex and the Chamber Of Commerce (who get paid to blow sunshine up our collective asses) try to claim. And it's not just Hispanics (legal and otherwise) that have left, there's plenty of others as well. I personally know of eight families (all good legal 'Mercans, for what that's worth) who have left this state since the real estate bubble burst, our economy when down the shitter, and it became painfully obvious that it is not coming back anytime soon. Not only that, but people are no longer interested in coming here either, thanks to our shitty state leaders. I just got back from a couple of weeks visiting the in-laws in Virginia and Pennsylvania, and met at least six people who said things a long the lines of "We thought about moving to/retiring in Arizona, but not any more, not since we saw how much racism and hate there is in your state. How did that stupid gay-hater bill even get introduced? Why do you keep electing idiots like Arpaio and Brewer? Why are Arizona people so stupid?"


This state is in deep shit. And it it weren't for my elderly, ailing parents, I'd get the hell out of here, too.

Jukes
Jukes

In my Tucson suburb, the market has been active this summer but prices are still far short of where they were when many of us bought pre-2007.  For quite awhile, when prices were at rock bottom, investors were the only buyers.  Now they're not as common but sellers are giving up on getting prices back to where they were before the crash and a lot of nice places have gone on the market.  Those places move as long as they are still obvious bargains.  What worries me is we now have some new construction going on for the first time in years and that's creating a different competition for people trying to sell ten-year-old houses for which they paid top-dollar.

DNichols
DNichols

January 2008 began the start of the I.C.E. Deportation/Incarceration programs, and the start of the "Great Recession"


The Housing market collapsed begining in mid 2007 at the start of a mass exodus of Immigrants, and as thier tens of thousands of homes, or apartments were mass vacated.


Arizona still continues the Anti- Immigrant Hate that caused our Economy to fall off a cliff.


Think about it?!

DNichols
DNichols

@getmeouttahere 

Well said.

"Desert Racist Wasteland"  sadly fits our State's current Government.


DNichols
DNichols

@Jukes 

We deported,incarcerated  and hated away over a million hard working people out of Arizona, this caused massive excesses in dwellings, and massive dead shopping centers which are also now in excess.

This is our I.C.E.'d Economy.

I.C.E. "Put the Car in the Ditch."

It will take many, many years for housing, and our economy to recover.

 

valleynative
valleynative topcommenter

@DNichols 

How do you account for the fact that the market rebounded strongly, while illegals were still being deported?

Think about it?  No, you probably won't.  You've made up your mind.

 

breathedeep
breathedeep

@DNichols have you thought about the chemtrail angle? heavier spraying began in late 2007 and early 2008 causing a lot of people to flee their homes. it's pretty well documented by experts if you google it.

valleynative
valleynative topcommenter

@DNichols @Jukes 

How, in your fantasy world, does the collapse of the international credit default swap market fit into the real estate collapse?

 

DNichols
DNichols

@valleynative @DNichols @Jukes 

Aren't you happy you are on an internet "Fantasy World" when you talk tough anonymously?!


Stay brave valley.


Stay hidden, and cowering.

DNichols
DNichols

@Jukes @valleynative @DNichols 

At least these were lilly white investors from Canada, not hard working brown people.

Down side is the Canadian investors don't work in Arizona, they pay no income taxes in Arizona, and our entire Government needs to be reduced in size to match our now smaller working population.

Until then we will continue to cut school budgets, and children's programs  to pay for the now excess of total Government.


We can just call the Budget Shortfalls a "Deficit".


When we all worked hard together our economy was strong.

ExpertShot
ExpertShot topcommenter

@DNichols @Jukes @valleynative True that - check out the TV Show "The Real McCoys".  Shows an America when migrant workers were valued and treated a little better.

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