After two solid years of explosive recovery, the metro Phoenix housing market had officially entered into a cooling off period in 2014.
The median single-family home price stood at $215,000 in December, a year-over-year increase of only 5.4 percent, according to the latest monthly housing report by Arizona State University’s W.P. Carey School of Business.
That’s a substantially smaller increase than what took place in previous years. For instance, the median price surged about 26.5 percent in 2012 and another 28.5 percent in 2013, according to ASU research.
But the condominium and townhome market was the market’s bright spot last year, with a 15 percent year-over-year jump in median price and a 12 percent climb in sales.
“Demand is shifting away from single-family homes and toward smaller attached homes that are easier to maintain and to ‘lock and leave,’” said Michael Orr, the report’s author and housing expert at W.P. Carey. “Growing numbers of baby boomers, whose children have grown up and left, are downsizing. Many millennials also seem to show a preference for smaller, easy-to-maintain homes in central locations.”
The housing market’s recent cool down is largely attributed to waning investor interest and still-tepid demand from traditional buyers.
Investors were mostly responsible for the market’s recovery that began in September 2011, flocking to the Valley in droves when prices were at all-time lows and foreclosures and short sales were rampant.
Some turned their purchases into income-generating rentals, while others fixed-and-flipped for a quick profit. That activity played a big role in the double-digit price increases and drop in foreclosure inventory that took place in 2012 and 2013.
But as prices continued soaring and foreclosures dropping, bargains became harder to come by and investors began losing interest in metro Phoenix.
Traditional buyers, however, haven’t been picking up the slack. So last year, home-price growth slowed as buyer demand remained lower than normal.
But Orr said the demand problem could start turning around, albeit modestly, this year.
“The primary increase in demand is likely to come from boomerang buyers who have repaired their credit after foreclosure or short sale several years ago,” Orr said.
