Real estate experts predict the Valley’s years-long housing glut is reaching its end and, as early as this spring, could stun home buyers by transforming into a shortage.
The crunch is expected to be more pronounced in the East Valley, where some subdivisions are approaching build-out and other builders are raising prices.
The prediction may seem outlandish given how gloomy real estate news has been for years, said Mike Orr, director of the Arizona State University Center for Real Estate Theory and Practice.
But a growing demand and shrinking supply has driven home prices up in recent months, he said. Orr thinks that’s gone unnoticed to people who will enter the market this spring, in what is typically the peak time for sales activity.
“They’re going to be surprised that it’s so hard to buy a house. They’ve been hearing for so long that there’s a glut of homes,” Orr said. “They’ll go out and find there’s not a lot to choose from and every time they bid, there’ll be three or four other offers.”
The shrinking supply is a mirror image of what happened in 2006, when there was a lag before the public realized the number of new homes had ballooned into a problem, Orr said. About 58,000 homes were on the market by late 2007. The long-term average is about 33,000 homes listed at any given time.
That’s down to 25,000 now or 19,000 when accounting for homes that have deals pending, Orr said. The unusually short supply will continue to shrink.
“By the time we get to 2013, it’s quite likely that we’ll need a lot of new homes,” Orr said.
A short supply should trigger price jumps for existing homes this year, said Jim Belfiore, president of Belfiore Real Estate Consulting. Prices went up 3.1 percent last year, but he argues they should have rose 20 percent in response to a 41 percent drop in real estate listings.
He expects that 20 percent jump will happen in 2012, starting with a 6 percent to 11 percent rise by March.
Belfiore’s company surveys each of the Valley’s 400 active subdivisions on a regular basis to gauge prices and sales activity. Belfiore predicts shortages will grow as 2012 goes on because 34 percent — or 136 subdivisions — will be sold out in a year.
Sales are especially strong in Queen Creek, where a jump in sales has allowed eight of 20 subdivisions to raise prices.
“The East Valley is a top performer,” Belfiore said. “In Gilbert, there are 58 subdivisions that are active today. It might be the most active submarket in the southwestern United States. Builders are pining for new lots. There’s a land shortage in Gilbert. Chandler is the same deal.”
The number of permits issued last year was a 40-year low, at about 7,000, Belfiore said. He expects that will grow to 10,400 this year, 15,800 in 2013 and 23,200 in 2014.
The construction should further boost the economy. Each new home creates 2.5 jobs for three months, Belfiore said.
Belfiore expects a strong 2012 because of falling unemployment, exceptionally low prices and record low interest rates. The market could be especially strong if employment gains continue and banks relax their lending standards, he said.
This year’s real estate market should be the best in five years, Orr said. It will take several years to resemble a normal market and any increases will be far short of what created the bubble, he said.
“I don’t think there will be the same speculation there was, but there might be a lot of people who do want to buy a house in the next two years, thinking, ‘If I don’t buy now, I might miss out,’” Orr said.
The number of foreclosures and short sales remains high but will be less of a factor in the market as time goes on, said Bob Bemis, CEO of the Arizona Regional Multiple Listing Service. Distressed homes are mostly the target of investors. Families tend to focus on new homes or traditional resales, he said.
The market showed signs of returning to health last year, he said. Median sale prices rose 6.5 percent to $117,000, and average sale prices were up 3.5 percent, to $162,000. He expects a burst of activity at some point in 2012.
Bemis said he expects potential buyers could dismiss a real estate professional’s rose-tinted predictions, given how they are known for saying there’s never been a better time to property. But he said skeptics should give weight to Orr, whose role at ASU divorces him from having any skin in the game.
“We’re very close on agreement on where we’re headed,” Bemis said. “It’s just a matter of degree.”
Contact writer: (480) 898-6548 or ggroff@evtrib.com
Rich posted at 9:23 am on Wed, Jan 18, 2012.
When your experts make the same 'prediction' every January, they will eventually hit a January when they are right. The recession is over (again).
fez posted at 9:56 am on Wed, Jan 18, 2012.
These experts are wrong more consistently than our expert meteorologists! Drive through the valley and SEE the empty houses and closed commercial properties then keep trying to sell your Polyanna views. C'mon, admit that we won't experience an increase in market value until the REAL SUPPLY of properties are occupied and our benevolent government gets a clue.................. GET OUT OF THE WAY
Hal Apeno posted at 11:29 am on Wed, Jan 18, 2012.
Real Estate professionals want this housing glut to be over so bad that they're starting to believe their own bull. I've noticed that some RE companies have been boosting their asking prices on recent repos.. because that's what they do. But, there's nothing to support those price increases, except possible deception.
I'm betting there's still a large shadow inventory being manipulated by the lenders and their government minions that will take YEARS to eliminate. Plus, I don't see any solutions to the high unemployment rate anytime soon, nor do I see lenders relaxing their standards.
Rainmaker posted at 12:20 pm on Wed, Jan 18, 2012.
if there are only 19K +/- of houses actively for sale as the article research suggested (not counting the Pending Sale/Under Contract) is it safe to assume that conservatively one-third to one-half of the 19K are nothing more than "Hopeful" short sale listings (small % ever close due to the nature of it) or just plain knockdown type houses - how much REAL inventory is there?
Listing prices are going up - that is a fact.
I believe a quick and easy policy initiated by Real Estate agencies/MLS would cure the woes surprisingly quick.
I would require a pre-approved and verified short sale commitment from a Lending institution "before" an agent accepts a listing and a broker approves it for MLS listing.....
we would answer the question in posed in this article in a matter of months
The banks that choose to Not foreclose or not short sale can become landlords or holding companies and the rest of us can get on with our lives and some sort of stability.
Why are the simplest solutions so hard for people to see?
DrJCA1 posted at 2:18 pm on Wed, Jan 18, 2012.
Real estate agents and companies always tell us how great the market is becoming because they are tired of not making money. Keep believing the pap they feed you, but the market still is horrible and will continue to be so until unemployment goes way down, jobs return in large numbers, and people regain their confidence in the economy, which is now dangling it's feet in the toilet.
onepercent posted at 3:13 pm on Wed, Jan 18, 2012.
"The market could be especially strong if employment gains continue and banks relax their lending standards" that is a pretty big "IF", especially the part about banks relaxing their lending standards. I mean, if they haven't been compelled to relax their standards by now what reason is there to think they will suddenly change course this year? Statements like this make me think these experts are basing their predictions more upon hope than upon reason.
HoleIn1Homes com posted at 3:48 pm on Wed, Jan 18, 2012.
These guys are actually correct except the shortage has been here for several months now in Gilbert, Chandler and parts of Mesa. I actively sell homes here and my last few buyers all had competition on entry single family homes. Taking several offers to secure one, your offer strenght depends primarily on financing type. This reminds me of the peak of 06 & 07. Their numbers are correct. When you look at the whole valley there are 18,436 Active homes take out condos and townhomes and were left with 14,438 Single family homes valley wide. Of those Bank owned accounts for only 1527, Short Sales 2334 and all others (flips & traditional sales) 10577. As for short sales they are going alot quicker on average 2-3 months now and with a lower price per sqft than most bank owned where the most competition is. As for shadow inventory nobody really knows the count but if they keep trickling them out like they have the last couple years the demand will be higher than supply for at least the rest of the year. My advice, be prepared to make your best offfer when you find the one, and use an agent that has the experience to get your offer accepted.
earlragland posted at 4:00 am on Thu, Jan 19, 2012.
Right now, the mortgage rates are so low that you might be able to refinance with a 15-year fixed-rate loan, thus escaping the debt trap faster than you might have originally planned, while also cutting your monthly loan payment. The icing on the cake is the outrageous amount of interest you will avoid paying. I have used only 123 Refinance to find rates
renew21 posted at 9:59 am on Thu, Jan 19, 2012.
Like George Costanza says, "its not a lie, if you believe it." which all real estate agents believe. You can read articles how people think that the housing crisis is over and that we are going up and expensive housing is right around the corner yet again. So they want another boom and bust to pad their pockets and rip people off? they are used car salesmen and the research shows that the housing might drop even more before it levels out and will slowly starts to climb in value again. Just look at the numbers, we are in a a long road ahead when it comes to housing. We need more jobs besides finical and construction industry that relies on huge growth. Get better jobs, and this housing crisis will bounce back sooner. If not, we are going to repeat history yet again. Oh, I also hope you know more people moved out of the valley then moved in. thats a net population decrease and this is all artificial boom in trying to raise the price of poor quality built stick homes.
Leon Ceniceros posted at 8:47 pm on Thu, Jan 19, 2012.
Something doesn't add up....on the Front Page of the Wednesday, Januar 18, 2012 Edition of this very same newspaper, this very same reporter wrote an article that was side-by-side with this article.
In the "other" article this very same reporter says the Mr. Orr uses the "MLS" (multilple listing service "created" for home sales giving the "pie-in-the-sky", "hail mary", sellers asking price which has about as much veracity as Obama's Birth Certificate.
One telling fact was that Mr. Orr....."was a real estate agent previously" and that he has a 12,000 person subscription-only real estate market analysis from Silicon Valley California (the glut-iest glut of real estate in California if not all of America").
Sounds kinda like ASU (who'd of thunk it...lol) went out and hired a ...."preacher to preach to the choir".
"Director of the Center for Real Estate Theory and Practice at the W.E. Carey School of Business" = great title, Dude......great title.
Leon Ceniceros posted at 12:02 pm on Sat, Jan 21, 2012.
P.S....Mr. or should I say, Professor Orr,
Here are some more facts to put into that "whiz-bang" computer "thing-a-ma-jigie".
"2010 foreclosures were 41,625.
2011 foreclosures were 35,855.
Foreclosures went from 39% of real estate transactions in 2010 to 34% in 2011.
Median prices fell in 2011 though, to only $125,000 from $138,000 in 2010 = $13,000 loss to the home seller. Can you belive that back in 2007 the same house that is now only worth $125,000 was worth a whopping $260,000 or a loss of more that 50%....50%".
Now why did I use "quotation marks" around these facts, well Professor Orr's predecessor, Professor Emeritus Jay Butler just disclosed them in yesterday's East Valley Tribune in a great....L.A.P.D. Sergeant Joe Friday "type" article...."Just the facts, Ma'am, just the facts".
chuckles3 posted at 4:30 pm on Mon, Jan 23, 2012.
*closes eyes, crosses fingers and hopes really, really hard*
Maybe the Easter Bunny will visit my house hand me the new appraisal on my home showing this 20% increase.