The pendulum continues to swing in 2014 real estate market - Ahwatukee Foothills News: Real Estate

The pendulum continues to swing in 2014 real estate market

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Posted: Sunday, May 11, 2014 4:45 am | Updated: 12:41 pm, Sat Sep 6, 2014.

There are many factors that affect housing inventory levels and pricing. One factor on the Valley’s real estate market is cash buyers. However, these cash buyers are losing their enthusiasm for the Phoenix area. Cash purchases during the first quarter were about 3,500 for local homes, but plunged 38 percent from the same period last year, according to research by Fletcher Wilcox, vice president of business development for Grand Canyon Title Agency Inc. Those 3,500 cash purchases also made up 28 percent of all Valley home sales during the first quarter. That is significantly down from the 38 percent market share claimed by last year’s cash buyers.

The first sign of the disappearance of cash buyer’s came last March, when prices were climbing rapidly and conventional financing outpaced cash for the first time since January 2009.

“In March 2013, purchases with conventional loans outnumbered cash purchases by only 96, but in March 2014, the gap widened to 715 more conventional loan purchases,” Wilcox said.

The gap has widened because of the absence of cash buyers. In fact, homes purchased with conventional loans in March were down 7.7 percent from a year ago, Wilcox said.

Price increases

It seems clear the double-digit, year-over-year price increases seen in the Valley’s housing market for more than a year has slowed buyer’s enthusiasm. Even though price increases have slowed, prices are still rising on an annual basis. As an example the median Valley home price in February was $195,000, which slipped 4 percent from January, but is up 15 percent year-over-year. This is according to the most recent data from Arizona State University.

These price increases have shifted the market back to a buyer’s market as further evidenced by the drop in Valley home sales. Overall sales were down approximately 17 percent year-over-year last month. This could be one of the main reasons why inventory is way up this March, which usually is the kick-off to the busy home-buying season.

Despite the fact that there were 36 percent more homes on the market Valleywide in December than a year earlier, which can be attributed to double-digit boosts in home prices all last year, that pulled many homeowners out of negative equity demand has continued to fizzle since July. That is according to the latest Arizona State University housing report released. In fact, single-family home sales were down 17 percent year-over-year, the report said. Even with a 12 percent increase in listings priced below $150,000 where the supply shortage had been most severe and demand highest sales in that range plunged by 47%.

For buyers, this has meant more to choose from and less competition. However, for sellers it means fewer showings, longer wait times for offers and falling prices. The median Phoenix-area single-family home price in December stood at $205,000 up a sharp 25 percent year-over-year, but only a 2.5 percent increase from November. These changes can cause disconnect between buyers and sellers. The disconnect between sellers and buyers can partially be explained because sellers operate on what they read in the news, which is always based on data that’s one or two months old and buyers who operate on current knowledge. Buyer’s have more current information because they are out there every day looking at houses and making offers.

Falling demand

Why is demand falling? Rising interest rates and poor consumer confidence, coupled with many wannabe buyers falling short on required down payments or poor credit from a previous foreclosure or short sale are the main reasons. These dynamics come as lending standards are still conservative.

“A larger portion of the population is simply choosing to rent, instead of buy,” according to Mike Orr, director of the Center for Real Estate Theory and Practice at Arizona State University’s W.P. Carey School of Business. “That includes much of the millennial generation and those who lost their homes to foreclosure or short sale. They prefer the rental lifestyle, don’t feel that secure in their jobs, or don’t have the credit history or down payment needed for a purchase.

“If the current cooling trend that started in July continues for much longer, 2014 could easily see average and median home prices move a little lower than they were at the end of 2013” Orr said.

The pendulum has been swinging from one extreme to the other in Phoenix since the housing boom of a decade ago. You have to pay careful attention to know which direction the pendulum is swinging. In 2014 the pendulum will surely swing again.

• Ahwatukee resident Stacey Lykins, MBA, is a Realtor with Ahwatukee-based West USA. Reach her at (602) 616-9971, S.Lykins@LykinsProperties.com or www.LykinsProperties.com.

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School highlight: Ambassador Academy

Daniel Ochoa/AFN
Dr. Elba Iris Reyes, principal at Ambassador Academy, poses with her students at Ambassador Academy Wednesday, Sept. 3, 2014.

For the past five years, Ambassador Academy in Ahwatukee has been offering its students a small-classroom setting.

Each class has no more than 15 students, which Dr. Elba Iris Reyes, Ambassador Academy’s principal, said is what sets it apart from other charter schools.

The school’s current enrollment stands at 47 students from kindergarten through fifth grade.

“We have academic excellence in teaching and learning, we have high expectations for our teachers and their practices, and we have high expectations for our students,” Reyes said. “We also focus on leadership and character development.”

Ambassador Academy’s Parent Teacher Organization is devising fundraising opportunities to raise money for the school’s playground facility.

For additional information about Ambassador Academy, visit www.ambassadoracademy.us.

• Compiled by Daniel Ochoa.

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