Home Prices in the Valley of the Sun
The numbers are in, and everybody wants to know – what is the latest on metropolitan Phoenix area real estate? Before I give you that, I have to tell you about my vacation. Like many Arizonans, I went to San Diego last month. But unlike normal people who spend their vacation on the beach, I felt it necessary to put a little time in researching how their market compared to ours.
In the San Diego area, I learned that their prices bottomed out, and recovered, much quicker than ours did. As of July 1, San Diego’s prices had risen 14 consecutive months. Annual home prices had increased 11.2 percent in June from the same month in 2009. San Diego had the second highest annual home price increase, behind only San Francisco, compared to the other 20 metro areas surveyed.
But it remains to be seen whether prices will continue to rise or will flatten or dip there, as on a monthly basis, the increase was only .4 percent. And based on the S&P/Case-Shiller index (www.standardandpoors.com/indices/sp-case-shiller-home-price-indices) seasonally adjusted numbers (which accounts for the different levels of buying activity through the year), San Diego’s prices declined .3 percent in June from the previous month.
Nevertheless, the metropolitan Phoenix market would be thrilled with those numbers. Here foreclosures climbed during August, the number of home sales fell, and prices dropped. One of the most watched figures is the median price (half of all sale prices are above, half are below); on existing valley homes it fell to $123,900 from $129,000.
The 5 percent drop in price reported by Case-Shiller from July to August was the second month of declines. Predictions are that a few more months of declines may occur, followed by a strong to moderately strong recovery. One of the explanations for the decline is the difficulty in getting financing. If you are self-employed, or if your income isn’t steady, lenders may not work with you – even if your credit is good. For those with a foreclosure or other credit problem on their credit report, it can be equally hard to get a loan.
But there is good news. Our prices are still far above our metropolitan Phoenix median price low of $119,000. The other good thing is that interest rates continue to hover at near record low levels.
Since approximately more than 83% of Arizona households can afford a median priced home, demand for homes in the lower price ranges, in desirable areas such as south Scottsdale, should continue to be strong.
The important thing is to not be discouraged by the news if you are considering buying a home. Try not to obsess over the latest facts and figures. You have to take a long view to understand Arizona real estate. As my research about the desirability of our market to out-of-state and foreign buyers shows (see my earlier blogs), we have structural advantages over real estate markets in other areas. Although our real estate has been volatile lately, over time we have been consistently good.
We know that two things will happen: prices and interest rates will rise. If you are sitting on the sidelines now because things sound bleak, you may not be able to afford the home or the loan you need when the media trumpets the news that our real estate market is back. Buy low, now!
– N. Mark Kramoltz © 2015