Phoenix Real Estate Market Report November 2014

Welcome to our November 2014 Phoenix Real Estate Market report and commentary. Here is what we have to share this month…

You may have read the Phoenix real estate market is sluggish, soft, or downright bad. We disagree. QUESTION: Why is a relatively slow and steady market a bad thing? ANSWER: It’s not, but saying so doesn’t sell newspapers or give us that cool adrenaline rush.

We would like to make a bold statement: The Phoenix real estate market is actually rather healthy. Additionally, the press and talking heads should quit telling a sad tale and start praising our wonderfully steady market.

That said we need to offer a foundational idea.

The Urban Team’s Premise: If we take out the abnormally large number of investor purchases over the past few years, our current market is much as it has been for several years.

Let’s look at some numbers. Specifically, let’s gaze at single family home sales in the 8 largest cities in metro Phoenix and do something fun. We will look at all the sales and then take out those priced under $100,000, the most popular for investor buyers and a few savvy non-investor types.

Year Single Family Home Sales (All)

Single Family Home Sales (over $100K)

2010 40,081 28,621
2011 48,121 30,306
2012 42,148 35,859
2013 39,508 35,886
2014 33,577 31,989

It is quite apparent low cost homes were a large portion of the market in 2010-2012 then trended downward in 2013 as fewer investor priced homes were available. Today, top minds like Michael Orr at ASU, tell us the big investors have moved on to greener pastures in Texas and the south east. Thus, most current home purchases are owner occupied, not investor types.

2014 Phoenix Real Estate Market Report

Click Image to enlarge

The graph to the right, courtesy of the Cromford Report, shows investor purchase activity over the past few years. Graphs are so sweet the way they sum things up so clearly.

Conclusions: Overall market activity is certainly down and much of that bustle was due to abnormally high investor buying. If we take out the irregularity, we find we have a rather normal real estate market. A bit boring, but certainly not depressing as the media would have us think.

Best of all, home values are not plunging downward. Cromford Report, a simply wonderful analysis tool, shows a sustainable 3.4% appreciation in the greater Phoenix housing market. This figure is certainly not like the 10-23% numbers we saw in 2012-2013, yet it is encouraging the market did not take a pendulum swing in minus numbers. See Annual Appreciation Meter.

What’s Keeping The Phoenix Real Estate Market From Growing Faster?

Most Phoenix real estate market news stories talk about the slow market and many ask, when will the market start to climb again? We believe there are 4 major factors keeping the market quiet. All affect demand and explain why historically low interest rates are not pushing things upward.

  • Modest Consumer Confidence.
  • More Stringent Loan Qualification Requirements.phoenix real estate market report november 2014
  • People Who Went Through Foreclosure or Short Sale Unable To Get A Loan.
  • Millennial Generation Not Choosing Home Ownership.

Low consumer confidence in the real estate market, in my opinion, is sucky for several reasons.

  • People don’t think they can qualify for a home loan.
  • Younger people saw their parents, uncles, aunts, older sibling and friends get creamed by the Phoenix real estate market.
  • Our political leaders do not inspire confidence. I could say a lot about this but I am sure you know what I mean.
  • Our media focuses on the negative. When was the last time you were inspired by a TV or print news story?

Mortgage loan are perceived to be more difficult to get. That said, the qualification process is not much different today than in the 1940’s through mid-1990’s. You need a few reasonable things:

  • A job within the same industry for more than one year.
  • Good credit and debt to income ratios.
  • Savings for a down payment that ranges from about 3% to 25% depending on the type of loan and property.

The fact that ten’s of thousands of Phoenix area homeowners lost their homes between 2007 and 2013 contributes to our lack of home buyers. Many of these people are either reestablishing their credit or in the cue waiting until they can qualify for a loan. The waiting period is somewhere between 2 and 7 years depending on loan type and other requirements. As these people can and do move back into home ownership they will spur more market activity.

Millennial home buyers are a hot topic these days in the real estate market.  In the past, people between the age of 25 and 40 were first time and move-up home buyers. For a variety of reasons, many in this age group are holding back from making the home ownership plunge. As this age group makes decisions that will keep them in a geographic area, pay off student loans, feel more confident about the world and have families we expect them to find owning a place more attractive.

What Do We Expect For The Rest of 2014?

We expect to see a slight upswing in sales for November and December 2014. This is nothing new as we usually see a bit of an upswing in late fall. We expect a slight upward tic in new listings as word is getting out that our supply of homes and condos is rather low.

Final Thoughts About The 2014 Phoenix Real Estate Market:

We do not see a calm market as bad. It is actually a bit relaxing and comforting. People with decent credit and a bit of money in the bank continue to buy homes and condos. New places, thus choices, are being added to the market. If you are looking for a big uptick in your home or condo’s value, don’t hold your breath. You are likely to see modest gains over time. This is a time to remind people of something.

Your personal residence is not a wise short term investment. Your grand parents knew this, most parents too. Robert Kiyosaki, author of Rich Dad, Poor Dad, cautioned people against thinking their principle home was part of their investment portfolio. Your personal home provides continuity, comfort, stability and can be a nice long-term investment for the future. If you convert it to rental property, then it becomes an investment.

One more thing… We are keen to see what the Super Bowl will do to downtown Phoenix’s real estate market. Many people will be surprised by how cool our city core has become… both locals and tourists. We think a lot of people will decide that Urban Living is a good idea and want to buy a place in downtown Phoenix. We’ll see how good our crystal ball is come March and April 2015.

Best wishes for you and yours as we enter the holidays. If you have questions, know we are here for you. Knowledge is power and we want you to be extremely powerful.

Gene Urban and Ron Urban
The Urban Team at Realty Executives
602-234-5777 or Gene@UrbanTeamAZ.com

Connecting people to the perfect place for over 20 years.

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