Foreclosures in the Phoenix-area housing market have returned to "normal, historical levels" while the median price for single-family homes continues to increase, according to a report from the W.P. Carey School of Business at Arizona State University.
Foreclosures triggered by the housing crisis on single-family homes and townhome/condos in May were down 53 percent from May 2012, according to the report. Foreclosure starts - owners receiving notice their lenders might foreclose in 90 days - were down 67 percent in the same period. Given population growth, this means the area finally hit its normal, historical level of foreclosure starts in May, according to the report.
The median price for a single-family home rose to $185,000 in May, a 26 percent increase over the median price of $147,000 in May 2012, according to the report.
The brighter picture of the Valley's improving housing market was dimmed only by the fact that the chronic shortage of homes for sale continues and could last for years, according to the report.
The pressure of rising prices should vanish during the summer months, but will pick up again in the fall once the Valley's snowbirds return and temperatures drop below 100 degrees, said Mike Orr, director of the Center for Real Estate Theory and Practice at the School of Business.
Sales activity for homes and condominiums increased 6.6 percent between April and May, the second straight month in which activity increased during the same time of the previous year, according to the report.
Orr said the sudden and recent increase in interest rates has reduced motivation to refinance existing home loans. "However, it is almost certainly increasing buyers' determination to purchase homes now, rather than later, when rates may go even higher," Orr said.
He said he sees early signs some lenders may react to higher interest rates by easing up their rules, allowing more people to buy homes. He said he also believes prospective buyers may simply settle for purchasing smaller, more affordable houses than they originally wanted, in order to manage the higher interest payments.
The shortage of homes is exacerbated by the decline of cheap foreclosures coming into the market and because homeowners are reluctant to sell because they're either locked in by negative equity or waiting for prices to keep rising.
The number of active single-family listings without an existing contract was just over 11,000 as of June 1, down 0.4 percent since May 1, according to the report.
Of available homes, 83 percent are priced above $150,000, a problem for potential homeowners looking in the lower price range.
"The chronic shortage applies to both homes for purchase and homes for lease," Orr said. "The average time for a leased home to be on the market is down to about one month. With this fast turnover and relatively low vacancy rates, it's perhaps surprising that single-family and condo rents have only very modestly increased."
New-home builders aren't helping meet the immediate demand, ensuring they don't overbuild as they did before the housing crisis to keep prices moving higher, according to the report.
Current new-home sales rates are less than a third of what would normally be needed to keep up with local population growth, according to the report.
As a result, Orr says the combined population of Maricopa and Pinal counties grew 2.9 percent from 2010 to 2012, but the number of owned and leased dwelling units only grew by 1 percent, according to the report.
Also, institutional investors continue to lose interest in the Phoenix area. Their buying spree that began in 2011 is falling. The percentage of the area's total single-family-home and condo sales carried out by investors is down from 39.7 percent in July 2012 to 27.3 percent in May. Most investor transactions are actually going to so-called "mom and pop" purchasers. Orr says they own roughly 96 percent of the area's rental-home inventory.
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