By Catherine Reagor, Matthew Dempsey and Ryan Konig
The Republic | azcentral.com
For the first time since the housing-market free fall began more than five years ago, it’s now possible for every type of player to get back in the real-estate game.
Basic economic laws of supply and demand worked their magic over the past year, as a huge number of distressed properties were snapped up by institutional buyers and other investors. That played a big role in solidifying the market, and as the year passed, a stronger economy brought a healthier mix of players into the game. They included an ever-growing number of first-time buyers, new-home buyers and homeowners who finally were able to sell for a profit.
Overall, the growing group of buyers helped propel the region’s median sales price up more than 34 percent in the past year, as affordable properties on the market were in limited supply. That price increase, in turn, has motivated more homeowners to put their homes up for sale because they are no longer underwater.
Analysts say home prices are expected to continue to climb this year because of the low supply of homes for sale and rising demand from regular buyers trying to purchase.
Big investors, always looking for rock-bottom prices, appear to be moving on to other markets, leaving metro Phoenix more accessible to traditional homebuyers.
The increase in home values has made it more difficult for prospective first-time buyers, but properties are still affordable compared with prices during the boom.
New-home sales and prices also are rising, mostly due to buyers tired of competing to purchase houses in areas with good schools, jobs and shopping. Most important, a growing number of homeowners can sell for a profit again.
Overall, metro Phoenix homeowners are likely feeling more flush. The median sales price in most of the region’s ZIP codes climbed more than 10 percent last year, according to The Arizona Republic’s Valley Home Values report. Much larger median sales-price increases often were recorded in ZIP codes where prices had dropped the most.
Some parts of the Valley saw home-sales prices soar more than 30 percent. In the west-central Phoenix ZIP code 85015, the median price shot up more than 55 percent during 2012, the biggest annual gain in metro Phoenix. The number of homes sales in nearby Phoenix ZIP code 85012 jumped 53 percent, the biggest increase Valley-wide.
Around Mesa’s Red Mountain Freeway in ZIP code 85207, the median home jumped 40 percent. In north Glendale, the median sales price soared 35 percent. South Scottsdale, a more affordable part of the city, saw a 24 percent increase in prices within ZIP 85250. Tolleson led the southwest Valley with a 36 percent increase in its median sales price. Queen Creek’s 85142 ZIP Code led Pinal County for home price gains with a 37.8 percent increase.
Overall, the median home-sales price rose 34 percent, to $164,000 in 2012 from $122,500 in 2011, up 34 percent. Reflecting the tight supply, the number of home sales dropped almost 2 percent, to 102,837 in 2012 from 104,629 in 2011.
The median price of a metro Phoenix home hit a record $250,000 during the housing-boom peak in 2006.
“Areas of the Valley with the biggest shortage of homes for sale are seeing the biggest price increases,” said Mike Orr, real-estate analyst with the W.P. Carey School of Business at Arizona State University. “Everyone is participating in the housing-market recovery, and those who aren’t want to, but can’t yet.”
A further sign of a healthier market: Foreclosures dropped 46 percent, to 24,073 in 2012 from 44,700 in 2011.
Because prices remain affordable, the biggest obstacle for most first-time buyers is competing with investors who can pay cash and who are not concerned about a house’s appraisal. For homebuyers taking out mortgages, the appraisal must come in at least as high as the purchase price, or they have to come up with the difference.
Alyssa Shanosky, a pharmacist, recently bought her first house. She found the south Arcadia home when it had been on the market for only a few days and competed with other buyers by agreeing to purchase the house “as is.” She put 20 percent cash down.
“It’s tough for many first-time buyers to compete with investors who can pay cash,” said Christine Espinoza of Phoenix-based HomeSmart, who worked with Shanosky. “The sellers knew the price they wanted and didn’t want to get nickled and dimed. And luckily the appraisal came in higher than the selling price.”
Shanosky is updating the house with wood floors, stainless-steel countertops and tile.
Orr said the shortage of homes for sale under $150,000 is causing bidding wars among first-time buyers and investors.
Normalicia Arellano lived in a manufactured home and saved for several years to buy her first house. The single mother works at Intel and wanted to buy a house near her daughter’s school.
“It was like finding a needle in a haystack, but we found a house she could afford across the street from the school,” said Yamile Hirsh of HomeSmart. “I feel bad for many first-time buyers. There’s so much competition for the houses they can afford.”
The number of homes built in the Phoenix area climbed 71 percent to 11,600 in 2012. New-home sales followed the trend, with buyers closing on 10,034 new houses last year, up 41 percent from 2011. These are the biggest jumps for the new-home market since 2006.
Overall, the median price of a new house climbed almost 15 percent during 2012 to reach $240,000.
Southeast Valley communities Gilbert, Chandler, Mesa and Queen Creek are seeing the most home construction because the areas have the strongest buyer demand.
Sam Cutruzzula recently purchased a new Fulton home in Gilbert’s Freeman Farms. It’s the second Fulton home he has bought. The first house he was able to sell for a profit to help pay for the new one.
“We looked at existing homes, but it was difficult to find one that matched our needs,” Cutruzzula said. “Even houses that were six or seven years old needed work.”
New-home prices in the Cutruzzulas’ neighborhood climbed almost 13 percent in 2012.
In February, the median price for a new metro Phoenix house reached $257,428, a 15 percent increase in 12 months, according to RL Brown Reports.
Overall, a growing number of homeowners in areas with the biggest increases in sales prices can sell for a profit again. By fall, more homeowners who bought in 2002-03 realized they finally had enough equity to sell for a profit.
But most homeowners interested in making a move are still on the fence, waiting for prices to increase more before moving up or downsizing. That keeps the supply of homes for sale tight. But growing signs of a more normal market are evident.
Regular home sales — between homeowners who don’t need to sell through a short sale or to avoid foreclosure and buyers who are going to move into the house — climbed 50 percent in January from the year before.
“Rising prices have allowed many more metro Phoenix homeowners to sell,” said Diane Brennan of Scottsdale-based Keller Williams Integrity First Realty. “The worst mistake sellers can make now is not pricing their home correctly.”
Shoppers are getting weary of bidding wars and listings pulled off the market by sellers only to be re-listed at higher prices a month later, she said.
Investors back off
Investors purchased thousands of houses in 2012 and helped drive up prices, particularly in metro Phoenix’s more affordable neighborhoods.
Now, higher prices are deterring some. Foreclosures have slowed to 2007 levels, so the supply of inexpensive houses being sold by lenders, mostly to investors, is rapidly dwindling.
In January, 31 percent of the region’s home purchases were made by investors. That’s still relatively high for a normal housing market. But its the lowest level of investor homebuying in metro Phoenix since early 2011.
“As prices have increased, we’re now seeing more real buyers with families looking for a home as opposed to investors looking for investment properties to turn a profit,” said Diane Watson of Scottsdale-based Russ Lyon Sotheby’s International Realty.
“Many of these investors have moved on to other markets.”
Housing analysts predict this more normal housing market to expand in 2013, with more listings and steady price gains, especially in more affordable areas of metro Phoenix.
There could be setbacks if interest rates rise too fast or prices climb too high, Orr said.
Also important for the housing market’s continued recovery is more homeowners selling and more new homes going up.
Orr summed it up: “Housing prices are going to continue to climb more rapidly than normal, until there’s a balance between supply and demand in the market.”
Reach the reporter at firstname.lastname@example.org. Follow her on Twitter @catherinereago