Home Prices in the West Are Rebounding as Inventory Shrinks

source: NY Times

Joshua Lott for The New York Times
Jesse Pekarek, a Phoenix broker, at a house that sold for $375,000; bids started at $364,900.

By 

PHOENIX — Prices for existing homes here and in surrounding areas climbed by 25 percent during the 12-month period that ended in April, pointing to a decisive shift in the market realities of a place where foreclosed signs, abandoned properties and deserted neighborhoods became one of the most enduring symbols of the nation’s crippling real estate bust.

But hold off on the fireworks for a moment.

The rise in prices may be driven less by a resurgence in the local economy — real as it is — than by an inopportune dearth of houses for sale, as well as a steep decline in the number of bank-owned bargains hitting the market.

Builders, wary of committing too much money to new housing in the aftermath of the recession and painfully slow recovery, did not have enough units available to match an unexpected increase in demand from buyers. Property owners, meanwhile, have remained on the sidelines, waiting for higher prices before putting their houses up for sale.

“We’re suffering from a case of buyers’ enthusiasm just as we’re running out of homes to sell,” said Mike Orr, director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business at Arizona State University and the author of a monthly report on the area’s housing stock.

The increase in Phoenix-area home prices far outpaced the rise in home values nationwide, where the median price of existing single-family homes went up by 10.1 percent, according to the National Association of Realtors’ most recent statistics. It was also higher than the surge in home prices in the West as a whole, which, at 16 percent, was the most robust gain among all regions in the United States.

Prices here have not fallen since September — a good sign, but not yet a sign of a booming real estate market, analysts said.

In Las Vegas, another city crushed by the burst of the housing bubble, the market hit its bottom in March. But while there has been an increase in sales and construction activity since, home values have been slower to rise.

And in Atlanta, another city hit hard by the economic downturn, the situation is worse today than it was a year ago because of a stubbornly high number of foreclosures.

When all is taken into account, the picture evokes caution: the overall value of homes in 20 metropolitan regions tracked by Standard & Poor’s Case-Shiller index remained unchanged, and prices are still sitting at their lowest point.

“Because of new buyers having difficulty getting mortgages and because of the still-large number of foreclosures hitting the market in some parts of the country, it’s hard to say that we’ve turned a corner,” David Blitzer, chairman of the index committee at Standard & Poor’s, said in an interview.

Even in Phoenix and its suburbs, the rebound in house prices has been uneven.

Home values are still declining in the areas that were least affected by foreclosures during the recession, like upscale Cave Creek and Fountain Hills on the metropolitan area’s northeast rim, according to Professor Orr’s report. They have risen most acutely in places hardest hit by foreclosures, for instance west side suburbs like Glendale and Tolleson.

Christopher J. Mayer, a professor of real estate at Columbia Business School, said the price increase happened because foreclosed homes, which were usually among the cheapest, were no longer widely available. In the Phoenix area alone, the number of distressed homes on the market fell by 81 percent in the year ended in April, and the number of foreclosures fell by 62 percent, the report showed.

New home construction has picked up, though, as builders try to replenish the market, targeting not the small investors who are still looking to buy cheap homes they can fix and flip or turn into rentals, but first-time homebuyers and expanding families who are trying to enter the game before prices get too high for them.

Some of those builders, however, have temporarily closed sales offices because they cannot build enough homes to fulfill the demand. Others have been rushing to buy land.

Jordan Rose, a lawyer in neighboring Scottsdale who represents builders buying large parcels for development, said her law firm had handled 70 percent more transactions so far this year than during any other period over the previous four years.

One of the state’s most prolific builders, Maracay Homes, bought 13 pieces of land for development over the past 30 months in Phoenix and Tucson, where homes have been rising at a fast clip. As of June 1, the company had sold as many homes — 242 — as it did in all of last year, its president, Andy Warren, said.

Over all, builders have on average a two-and-a-half-month supply of new homes in their subdivisions.

“There’s certainly a trajectory of recovery,” Mr. Warren said, “but it might be a couple of years until we get there.”

The low inventory has fueled bidding wars again. A foreclosed house in the suburb of Chandler, bought for $225,000 in 2006 and listed by the bank for $57,420 last month, got 84 offers — and the offers stopped coming only because the bank stopped accepting them. (A note to brokers on the listing reads, “NO MORE OFFERS.”) The sale was pending as of Monday.

On a recent Thursday, Jesse Pekarek, a broker with HomeSmart who has been selling homes in the area for almost nine years, was inspecting the cosmetic repairs he had asked a homeowner to make — a fresh coat of paint, new tiles — before putting the house up for sale.

The home — single-family with three bedrooms and two baths in the city of Mesa, just east of here — went on the market the following Saturday for $135,000.

By Sunday, it was already under contract, after the homeowner received multiple offers above the asking price, Mr. Pekarek said.

“Homes don’t necessarily have to have all the bells and whistles,” he said. “If they’re priced accordingly, and if they’re in a nice neighborhood, they’ll sell in the first few days, if not within hours.”

A version of this article appeared in print on June 21, 2012, on page A14 of the New York edition with the headline: Home Prices in the West Are Rebounding as Inventory Shrinks.
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