Real-estate agents are predicting a proliferation of for-sale signs on front lawns. The metro Phoenix housing market is shifting away from investors for the first time since the market crash, leaving more properties available for traditional buyers. And the market appears neither overstressed nor overheated, heading instead toward a more natural balance.
Thousands of prospective sellers, once worried about losing money on their houses, have listed their properties after seeing prices skyrocket over the past two years.
More buyers, outbid multiple times by investors in the spring, have been able to sign contracts recently. Also working in buyers’ favor are mortgage interest rates, which are falling again after a brief summer jump.
The number of foreclosures and short sales has dropped dramatically, meaning fewer bargain-hungry big investors are in the market looking to pay cash for Valley properties.
The investors played a role in the market’s early recovery: When prices hit bottom in 2011, an investor buying spree created a short supply of affordable homes for sale and sparked a 65 percent jump in the region’s median home-sales price over the past 24 months.
Now, the fast run-up in prices is actually spurring sales. Even as investors have exited the market because higher prices equate to less profit for them, more traditional buyers are anxious to purchase houses before prices and interest rates climb too high.
If no unexpected jolts occur, real-estate analysts expect more properties to go on the market. Resale prices are expected to continue to rise, but at a slower rate because of the expanded number of listings.
The Valley’s median sales price has climbed 30 percent so far this year, and home values are up in every neighborhood across metro Phoenix, according to The Arizona Republic’s fall Valley Home Values special report.
Most areas in the region have experienced double-digit increases in home prices so far this year, and a few spots have seen values return to boom levels, according to The Republic’s analysis of data provided by Information Market, a real-estate data firm owned by the Arizona Regional Multiple Listing Service.
“The housing market has been crazy for people trying to purchase before houses get too expensive,” said Yamile Hirsh, a real-estate agent with HomeSmart. “But it’s finally getting better for buyers because more homeowners have equity now and can sell.”
Danya Diaz began shopping for a metro Phoenix house in March. She upped her bid on several houses by $10,000 but still was repeatedly outbid by investors.
In September, her $185,000 offer for a Gilbert home was the top bid. She moved in a few weeks ago.
“Interest rates were really low in March, and I hoped to buy then,” said Diaz, 23, who works in human resources at Arizona Public Service Co. “But I didn’t want to increase my bid too much, even if I loved the house.”
She walked away from several bidding wars.
A 30 percent increase in the number of houses for sale during the past year has helped cut the competition a bit for Diaz and other buyers. More than 20,000 homes are now for sale in Maricopa and Pinal counties, according to the Arizona Regional Multiple Listing Service.
“The market is much better for homebuyers now,” said Matt Parker of Realty Executives. “I am working with more homeowners who want to buy closer in. … More homeowners are beginning to see they can sell.”
He recently helped Joan and Daniel Miller buy a home in north-central Phoenix. The couple is renting out their other house in northwest Phoenix. Joan said they feel very lucky that they were able to purchase in the north-central Phoenix neighborhood, where houses are rarely for sale.
“We made other offers on homes in the area during the spring, but were outbid or the appraisals weren’t high enough,” she said. “We’re glad we didn’t buy those homes.”
Sellers into buyers
The rapid increase in home prices means fewer Phoenix-area homeowners are “underwater” (owe more than the property is worth). Many more now can sell for a profit. The median price for a home sale has climbed to $194,000, according to the W.P. Carey School of Business at Arizona State University. That compares with $117,500 in September 2011, when the Valley’s housing market hit the bottom of the crash.
In March, Kristin Cronhardt sold her Cave Creek home in six hours, much faster than she expected. She had owned the house for 12 years, and the sale gave her a sizable down payment for another house. Cronhardt began shopping for a new house immediately, but closing a deal took until late August.
“I ended up paying a little more than the house appraised for because I love, love the neighborhood,” she said about her home in Scottsdale’s Sonoran Hills community. “Buyers shouldn’t lose faith in the market. It’s getting better because more people are selling.”
The percentage of homeowners who owe more on their mortgage than their home is worth has dropped in half since the crash. Fewer than 26 percent of metro Phoenix homeowners are now underwater, according to national real-estate data firm CoreLogic.
“In just the past few months, the market has shifted,” said Kim Fricke of HomeSmart. “It’s good news for buyers because there are more homes for sale, and homes are staying on the market a little longer.”
Homeowners, including lenders reselling foreclosure houses, have had the upper hand in metro Phoenix since the region’s housing market began to recover. Investors dominated the market by paying cash and closing quickly on the area’s foreclosures and other inexpensive houses.
But foreclosures have plummeted, and the number of investors buying Valley homes is shrinking monthly. About 24 percent of the homes sold in August went to investors. In early 2011, more than 50 percent of home sales were investor-driven.
“The seller is no longer holding all the cards in the Greater Phoenix housing market,” said Mike Orr, a housing analyst with ASU’s business school.
“If their offers are countered aggressively, some potential buyers may walk away because they now have more alternatives.”
More homeowners are expected to try to sell in the next six months. As the supply of properties on the market climbs, buyers will have an easier time finding houses and negotiating prices, real-estate analysts say. The result will be a slowdown in home-price increases. But market analysts say prices will continue to climb over the next four to six months.
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