Property prices are climbing in the metro Phoenix area faster than they have since back in the housing boom.
Some parts of the region have experienced home-value increases of 5-10% a month this year because of a shortage of homes for sale which is sparking bidding wars between regular buyers armed with pre-approvals for mortgages and investors.
This emerging real estate recovery of home prices in the Phoenix area started late last year and has been gaining momentum each month.
Property values still have a long way to go to recover to the pre-boom levels. Metro Phoenix’s median existing-home price is currently $124,500, which is about $20,000 below the area’s median in 2002 and well below the $267,000 from the height of the boom in 2006.
Housing-market analysts see this as the beginning of a long-awaited recovery for the area’s bruised housing market. The increase in prices is enticing more buyers who have been waiting for the market’s bottom to fal out before purchasing a home and may have missed it.
“Phoenix-area home prices are climbing so quickly in some areas now, due to such low inventory, it’s hard to keep up,” said Tom Ruff, real-estate analyst with online foreclosure service AZ Bidder and a founder of the Information Market, which supplies data for The Republic’s Valley Home Values report.
Ruff said the prices on sales closing now, which were started 90 days ago, are outdated. So to find comparable sales, buyers and real-estate agents need to look at sales negotiated last week. Appraisals are having a tough time keeping up with the uptrending market.
Investors have played a large role and have driven the market, usually paying cash for low-priced homes and beating out other bidders. About 60% of homes sold in metro Phoenix this year have gone to cash buyers.
Now, both regular buyers and investors trying to purchase before prices climb even higher are giving Phoenix’s housing recovery momentum.
However, not all parts of the region and real estate market are showing the same positive signs. Areas with lower-priced homes are drawing the most buyers, while the Valley’s high-end housing market is still in a slump.
Communities in metro Phoenix with better schools, shopping and freeway access are also beating out other nearby surrounding neighborhoods for home-price increases.
“Metro Phoenix has always been a pocket market for home sales,” said Jim Sexton of Realty One Group. “Chandler home prices may be steadily rising now, while a neighborhood in Mesa right next to its border are seeing declines.”
Ironically, many of the metro Phoenix neighborhoods and communities seeing the most rapid increases in prices now experienced the biggest decrease in values.
Some communities on the outskirts of the region, including Goodyear (west edge) and Queen Creek/San Tan Valley (southeast edge), drew more speculators and homebuilding during the boom. Many of the buyers had subprime loans that resulted in the Valley’s first wave of foreclosures.
Home prices in these new communities plummeted much lower than the region’s median but are now rising the fastest.
For example, in Goodyear, the median home price has increased 14% in the past year.
But while the increases are large, the prices are low: The growth translates to a median home price of $92,000 in the area, compared with $81,000 in 2010.
Some neighborhoods with bigger homes in the southeast Valley cities of Chandler and Gilbert are showing significant price increases, even though the areas did not see huge previous declines. Chandler’s median home price has increased to $186,000 from $170,000 last year.
Martin Dace has been shopping for a house in the southeast Valley for nine months. He has been outbid by both investors and regular buyers on foreclosures and short sales.
He’s now considering buying a new build home in Gilbert, close to his work. Though the new home will cost $25,000 more than a short-sale house of the same size, he won’t have to worry about being outbid.
“I am ready to buy and move in,” he said. “I am tired of losing out on bidding wars. And new homes’ prices are bound to go up, too, at some point.”
Housing analysts say better schools and higher-paying jobs in the East Valley draw buyers willing to pay more to live there.
Some real-estate agents say, homes priced below $400,000 in established neighborhoods are selling the fastest.
Real-estate agent Bobby Lieb of HomeSmart said a home listed for $165,000 in the upscale Encanto neighborhood in central Phoenix drew 26 offers and sold for almost $225,000.
There are similar bidding-war accounts across the Valley in neighborhoods where homes are priced below $400,000, even in higher-end communities.
Diane Watson of Russ Lyon Realty said a Carefree home priced at $300,000 through a short sale received three offers on the first day it was put on the market.
“The lender actually accepted the offer right away, but I had agents calling me for weeks with clients who wanted to put in backup offers,” she said. “So many buyers are losing out on bidding wars, they are getting desperate.”
The high-end housing market was the last to crash and is now the slowest sector to recover. Homes priced above $1 million in parts of north Scottsdale and in Paradise Valley are typically slow to sell.
Mike Orr, a real-estate analyst with Arizona State University’s W.P. Carey School of Business, said supply is a problem for the million-dollar-plus market.
He said so many homes are for sale with price tags and mortgages above $1 million, that this sector of the market could take several years to show increases.
The median price of a home in exclusive Paradise Valley has fallen to $870,000 from $1 million just a year ago.
However, last week, a Paradise Valley home did sell for $10.5 million in cash, the highest price paid for a metro Phoenix home since the boom.
Joan Levinson of Realty One Group said that there are buyers looking for good deals in the Valley’s high-end housing market but that some sellers are still hesitant to accept offers in the hope prices will increase.
Real-estate analysts say, if the current trends continue, with fewer foreclosure homes on the market, home prices will also continue to climb.
Foreclosures did increase slightly in February, but not enough to alarm housing-market watchers.
The number of metro Phoenix homes taken back by lenders during February is still less than half the number of foreclosures recorded during almost every month in 2009.
Also, the number of homeowners behind on their mortgages in Arizona continues to fall. So, many market watchers don’t expect another big jump in foreclosures.
Post-foreclosure sales are another matter — banks decide when to put those homes back on the market. If they were to flood the market with a large supply of vacant homes, they could drive prices down again, as a similar move did in 2008-09.
Longer term, experts are speculating a housing recovery not by bank-owned homes but by regular re-sale homes for sale by owner-occupants.
Orr said the recovery will feel much more real when homeowners who bought before the boom feel optimistic enough to put their homes on the market.
“Many homeowners and buyers are still several months behind the reality of what’s going on in metro Phoenix’s housing market,” said Orr, who also publishes the Cromford Report, an online daily real-estate analysis. “The housing market started recovering last year and hasn’t stopped.”