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buying a home, CARE Team, Casey Young, cash buyers, core advantage real estate team, foreclosures, housing market, investors, michael orr, phoenix business journal, phoenix real estate market, Realty One Group, selling real estate, Sherry Wong
Relief and excitement were the themes of the Phoenix-area housing market between 2011 and 2013, a period when surging prices and falling foreclosures finally began putting the worst fears of the recent real estate collapse in the rear-view mirror.
Those jovial feelings, in some ways, distracted from the reality that the rebound was largely driven by investors and cash buyers rather than the typical American family.
With investor and cash buyer activity now way down, the market has cooled this year. It illus- trates how slow regular buyers have been to return to the market and raises questions as to where the Valley truly stands in the housing recovery.
“The underlying key problem for entry-level and mid-range housing demand is lack of household formation due to many factors, including employment, falling birth rates, lower net migration and greater home-sharing, especially among millennials,” said Michael Orr, director of the Center for Real Estate Theory and Practice at Arizona State University’s W.P. Carey School of Business, in his monthly report last week.
The investor buying spree peaked in Phoenix during July 2012, when investors claimed almost 40% of all home sales that month, the report said.
The median single-family home price in April — just under $205,000 — was up 13% year-over-year and 46.4% from two years ago. That’s a substantially faster pace than the recovery of household income levels — a mere 0.5 percent between 2011 and 2012, according to the most recent available U.S. Census Bureau data — suggesting many would-be buyers are being priced out of the market.
Additionally, the job market is sluggish, with the statewide labor force count being down 35,500 in April from March, according to the Arizona Department of Administration.
On top of it all, lenders have yet to relax underwriting standards, making it difficult for regular home buyers to qualify for mortgages and take advantage of low interest rates.
“The key issue for us is if and when overall demand for homes to buy will return to more normal levels for all property types,” Orr said. “There are two main questions here: How quickly will lenders lower their underwriting standards? … Will those who could qualify under these new guidelines actually apply for loans?”
All this helps explain why April — supposedly the busiest time of year — saw sales drop 16% year-over-year, even despite the fact that buyers had 73% more listings to choose from than they did a year ago, the report said.
Article Content via Kristena Hansen – Reporter- Phoenix Business Journal – Originally Published June 20, 2014