Phoenix home prices have increased this year as supply decreases coinciding with a spike in demand, according to new data released from Arizona State University.
Median home prices rose 5.1 percent from last year as home buyers who have repaired their credit from foreclosure and short sale re-enter the market, the data found.
The 5.1 percent price increase may not sound like much, but with inflation close to zero it is significant, said Michael Orr, who released the report on Wednesday.
Supply for entry to mid level homes in the $200,000 range has decreased with “boomerang” buyers beginning to re-enter the market, Orr said, who serves as director of ASU’s Center for Real Estate Theory and Practice.
Boomerang buyers are folks who foreclosed on or short sold their homes several years ago, but have since repaired their credit enough to qualify to buy again.
The second quarter of this year has seen more demand than the same period last year, Orr said. That’s because boomerang buyers were still reeling from poor credit conditions a year ago.
In the third quarter, demand may taper off as less luxury homes are sold in the hotter months, Orr said.
The market should see some significant bumps into 2017 and 2018 thanks to buyers re-entering the market, Orr said.
Demand has been up across all levels of homes, but supply is very weak in the $200,000 price range where homes on the market receive multiple offers, Orr said.
“It’s really tricky right now and that’s trickling towards the $300,000 range,” Orr said. “But once you hit the $500,000 range you’ll find a home easy.”
Overall listings to date have fallen 3 percent in 2015 compared to last year.
Weak supply may be because home builders aren’t building cheaper homes, Orr said. They are focusing on building homes in the $300,000 price range and up, he said.
Lower priced homes are being built on the edges of the Valley, Orr said, but home buyers may not want to live there because of longer commutes and expenses that follow.
Much of the existing stock of entry level homes that are closer to the valley are still being occupied by renters too, Orr said, and those homes just aren’t reaching the market.