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October 23, 2014

Phoenix Housing Recovery Closely Watched

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Phoenix Housing Recovery Closely Watched

Phoenix is considered the nation’s first hard-hit housing market to stabilize, The Wall Street Journal reports. Other housing markets are taking a close look at what is happening in Phoenix to see if it may soon apply to their market’s recovery too. 

Mike Orr, director for the real estate program at Arizona State University’s W.P. Carey School of Business, recently released a report on what’s behind Phoenix’s housing recovery.

Orr notes that inventory levels are 20 percent higher than one year earlier, with an increase coming mostly from owners and not due to elevating levels of distressed properties. Distressed homes are down 29 percent year-over-year in the region. While inventories still remain low by historical standards, “at some point we will reach a pricing level where resale supply will free up,” he notes. 

Orr also notes that sales of foreclosures and other distressed properties have fallen, but sales of nondistressed properties have made up for those declines. 

Home prices in Phoenix are also rising rapidly. New-home prices rose 16.9 percent in the year and existing-home prices rose 7.9 percent. Home prices on foreclosures sold by banks also rose, increasing 19 percent year-over-year. 

Orr also notes that fears over the impact of too many homes being bought in bulk by institutional investors are being overstated. Orr says that rental firms have purchased about 11,000 homes in the Phoenix area, which is less than 1 percent of the metro area’s housing stock. 

Even if all those homes hit the market the same month, “we would still have less supply than in a normal balanced market,” Orr notes. 

Source: “Phoenix’s Housing Market: Saying ‘Bubble’ Doesn’t Make It True,” The Wall Street Journal (June 18, 2013)

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