Phoenix housing market sees healthy sales rate, dwindling inventory

Sales within the Phoenix housing market appear to be better this year compared to last year but inventory continues to dwindle. (Independent Newsmedia/Terrance Thornton)

Sales within the Phoenix housing market appear to be better this year compared to last year but inventory continues to dwindle. (Independent Newsmedia/Terrance Thornton)

While supply and demand continue to be the most dominant factor in the Phoenix metropolitan housing market, more homes have been bought and sold this year compared to last year, numbers show.

Across the Phoenix metropolitan area the median sales price of single-family homes has increased 7.7 percent — from 209,000 to 225,000 — year to date while the month of October showed a 15 percent decrease in active listings year to date across the marketplace.

In the month of September, the Phoenix housing market saw a 19 percent increase in single-family home sales compared to the same time last year.

The largest swings in market activity include a 54 percent increase in Housing and Urban Development home sales and a 55 percent decrease in distressed property sales, the latest Center for Real Estate Theory and Practice at the W.P. Carey School of Business housing report shows.

The report shows a distinctive increase in valuations for multifamily housing noting a 10 percent increase in median sales prices going from $127,000 to $140,000 for the month of September.

“The pricing is looking positive, the volume in September was quite robust,” said Director of the Center for Real Estate Theory and Practice Mike Orr in a Dec. 1 phone interview. “The sales have been slowing down this past month, which is due to an external factor. The sales will continue to look slower over the last few months of the year, which is due to TRID.”

The Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosures, or TRID for short, is a result of direction from Congress urging the Consumer Financial Protection Bureau to simplify the buying process and educate prospective sellers and buyers of the financial and tax implications of purchasing property.

The new rules come with new filing requirements and a more acute view of all finances involved in the transaction, real estate brokers, agents and experts agree.

“Consequently the sales rate has dropped,” Mr. Orr said of the real estate professionals becoming acquainted with the new regulations. “It is taking longer to close, but hopefully that will decrease. We have seen several hundred transactions not close that we would have normally seen close.”

Mr. Orr says the overall supply to demand ratio in the Phoenix metro area is “horribly mismatched.”

“There aren’t any where close to enough homes at the low end of the market,” he said of homes hovering around $100,000 in sales price. “However, it is quite reasonable in the middle markets.”

The top-tier housing markets — places like north Scottsdale, the Town of Paradise Valley and the Arcadia and Biltmore neighborhoods — started the year on a bull run but has now cooled off as the calendar year comes to a close.

“The collapse of the Chinese stock market has created a bit of impact on our stock market that has taken the winds out of the sails for the luxury market,” Mr. Orr says. “The $500,000 to $1 million market is doing quite good as jumbo loans are extremely popular.”

No two markets are the same as the local housing market begins to show signs of normalcy, Mr. Orr points out.

“It is going to be very different for different areas. We are seeing West Valley areas appreciate very fast,” he pointed out.

“The main constraint at the bottom end of the market is there are people who want to buy a home but cannot afford the down payment. But if we went back to normal lending rules those people would qualify and get a low-down-payment plan. We are still very restrictive on lending.”

There is no short-term fix to the Phoenix housing market, Mr. Orr contends.

“There is not short-term solutions for affordable housing because the builders aren’t building new homes,” he said. “Most of the builders are building homes to rent rather than to buy. We are lucky here in Phoenix I guess as population growth is still pretty strong.”

Pockets of development

In the heart of the Town of Paradise Valley a luxury homebuilder is building single-family homes bucking the trend of a tight marketplace dominated by new multifamily facility construction.

Last year Westroc Hospitality, Woodbine Development Corp. and Crown Realty & Development agreed to create a $65 million luxury resort and 18-hole golf course where the storied Mountain Shadows Golf Resort once stood.

The property now under development is at 5517 E. Lincoln Drive in the Town of Paradise Valley.

Cullum Homes has been the first to break ground — building a community to be known as The Village at Mountain Shadows — at the resort site at 56th Street and Lincoln Drive in the Town of Paradise Valley. A subsidiary of Scottsdale-based Cullum Homes purchased the 40 residential lots — just over 9,500 square feet with a value of $575,000 per lot.

Rod Cullum, co-owner of Cullum Homes, says the 40 single-family homes are selling faster than he had expected.

“We are looking like we are going to be half sold out before the models will be open,” he said in a Nov. 30 phone interview. “It’s a work in progress right now.”

The one-story layouts, ranging from 3,300 to 4,800 square feet, could double in size if buyers opt for the deluxe basement being offered in one of three different floor plans still in the final stages of development. The price point hovers around $2 million for homes at the Village at Mountain Shadows.

“Like any great masterpiece, there is a lot of great craftsman working very hard to make it really spectacular,” he said. “We have hundreds of people on the job site every day.”

Word on the street

Brian Keller, a real estate agent with Scottsdale-based RE/MAX Fine Properties, says different price points are part of the real estate game and as Phoenix defines its new normal those factors will likely not change anytime soon.

“Phoenix, just like any metropolitan market in the U.S. will always have certain areas and price points that perform better than others,” he said in a Dec. 1 written response to e-mailed questions.

“The Phoenix metro housing market seems to have been on a slight cooling trend these past few months. Consumer confidence, in combination with economic woes, have been hampering traditional real estate sales.  On the bright side, demand remains close to normal and supply in most areas is no longer building faster than usual.”

Mr. Keller says Phoenix metro area inventory is not as light as people think.

“It’s not a concern of mine,” he said in response to being asked if shrinking inventory is a concern of his. “There are always homes for sale that are not listed in any type of listing service. Pocket listings, for ‘sale by owners’ and the homeowner who is always willing to sell, ‘for the right price’ are just a few that you won’t see on your typical searches.”

Mr. Keller, who primarily sells homes in Paradise Valley, Scottsdale and central Phoenix, says 2015 was a strong year for sales.

“2015 has been amazing for me,” he said. “I’ve sold around 40 properties this year ranging anywhere from the $150,000 investment property to multi-million dollar luxury homes. While most of my business is in Scottsdale and Paradise Valley, I service the entire Phoenix metropolitan area.”

Mr. Keller contends the Phoenix housing market is one consumers must choose to invest for the longterm.

“Just like the financial markets, the real estate market in metropolitan Phoenix goes up and down,” he explained.

“It is impossible for anyone to predict what the real estate or financial market conditions will be in a week, a month or a year from now. Before purchasing any property, have an understanding of your financial resources and think about what level of risk you are willing to assume in the purchase.”

Northeast Valley Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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