Phoenix Business Journal by Kristena Hansen, Reporter
Date: Thursday, September 6, 2012, 12:40pm MST
Phoenix-area home prices dipped slightly in July after nearly one year of steady and significant gains, according to a report released today by Arizona State University.
Median single-family home sale prices across Maricopa and Pinal counties declined very modestly in July by less than 1 percent from the previous month, according to the monthly report, which is generated by ASU’s W.P. Carey School of Business.
In actual figures, that’s a difference of about $1,000 month-over-month to an average $149,000 home price for July.
However, the local market was still much better off than last July’s average median price of $114,000 — a difference of almost 31 percent — said Michael Orr, the report’s author and a real estate expert at W.P. Carey.
The slight month-to-month decline also does not necessarily mean the market is headed on a downward trend again, he said.
“This small drop is likely a reflection of both the normal, annual summer slowdown in the Phoenix-area housing market and a natural pause in the soaring prices we’ve seen here,” Orr said. “I expect it will continue through August, but prices are likely to resume their upward direction in late September or October.”
The local market, however, is still extremely competitive for buyers, Orr said.
Limited supply of existing homes is continuing with a 26 percent drop from last year as of Aug. 1, which pushed the number of actual transactions down by almost 8 percent during the same time period, the report said.
And the few homes that are on the market are also getting more expensive; in fact, 78 percent of homes for sale in July were listed above $150,000.
“That means competition for the other 22 percent is fierce,” Orr said. “Most homes priced below even $250,000 are attracting a large number of offers within a short time, and offers often exceed the asking price. Ordinary home buyers are still struggling to compete with investors who offer all-cash, with no appraisal required.”
The presence of investors in the local market has become so prevalent that more than half — 54 percent — of all transactions for $150,000 or less went to all-cash buyers, he said.
Frustrated traditional home buyers have thus continued turning to the new-home market instead as an alternative.
In fact, new-home sales in the Valley have surged 58 percent since last July while construction permits have jumped at a staggering 87 percent rate during the same period, he said.
The competitive environment is also largely due to the fact that the Valley’s “distressed supply” — meaning short sales and foreclosures — has seen a dramatic 69-percent fall year-over-year.
“Most lenders are strongly encouraging homeowners facing financial hardship to use short sales as a preferred alternative to foreclosure,” says Orr. “Consequently, we have seen single-family short sales grow by 12 percent over the last year, while foreclosure rates have declined sharply.”