Real estate activity in Phoenix is one giant contradiction with home prices growing at a time when new foreclosures are entering the market, the W.P. Carey School of Business at Arizona State University said in a report.
Home prices in Phoenix rose 32.4% over last year in May with the median single-family home price growing from $111,000 in May 2011 to $147,000 in the most recent ASU report.
Real estate valuation firm Pro Teck Valuation Services claims Phoenix exemplifies a market that has overshot its bottom. Pro Teck CEO Tom O’Grady suggests Phoenix-area homes are selling below their replacement costs, giving investors large yields.
Buying activity is picking up and generating new activity, and it’s occurring even as new foreclosures trickle into the market.
Generally, new foreclosures push prices downward, but foreclosures in Phoenix grew 18% in May having little to no impact on rising values.
The ASU study suggests that while new foreclosures are worrisome, they are having little effect on housing demand, especially with supply levels remaining low and prices causing competitive bids on desirable properties.
Single-family listings in the Phoenix-area inventory fell to 8,550, ASU said.
“The amount of overall sales activity is down, due to the short supply,” the ASU report explained.”The number of single-family home sales fell 5.8% compared to last May.”
Pro Tech describes the contradiction in Phoenix as one in which multiple factors are playing off each other at once. In other words, home prices eventually plummeted low enough to spark new buying activity. That factor combined with falling inventory levels led to year-over-year price increases. While new foreclosures are coming back online, ASU researchers do not expect prices to plummet.
“The Phoenix market recovery shows many positive leading indicators including the number of active listings in Maricopa County down 39.4% from a year ago, months of remaining housing inventory down to 2.5 months and foreclosure sales down 50.4%,” said O’Grady with Pro Teck. “In many areas of the Phoenix market, we are seeing nearly every ZIP code classified as strong or good, according to our most recent Market Condition scoring system.”