The Phoenix-area housing market has been cooling off since July and is expected to continue losing momentum heading into the end of the year, a new report from the W.P. Carey School of Business at Arizona State University claims.
"I anticipate sales will be way down in November and through the holidays, when some people even take their homes off the market until late January," says Mike Orr, director of the center for real estate theory and practice at the W. P. Carey School of Business.
"We also anticipate a much slower rate of price appreciation in 2014 than the furious pace we have witnessed over the last two years," Orr added.
Phoenix-area home prices have been growing since they hit a low in September 2011, with the median single-family home price increasing 71% from October 2011 to October 2013.
Meanwhile, market conditions are improving for buyers but worsening for sellers as the supply of homes available for sale starts to drastically rise.
While there is a 40% increase in active listings from Nov. 1 last year to Nov. 1 of 2013, the demand has tumbled, with the amount of single-family home sales activity falling 19% from October a year ago to this year.
According to Orr, supply is expected to exceed demand before the end of the year, even though supply is still 15% to 20% below what would be considered normal. This is attributed to the sudden weakness in consumer sentiment, including concern over the recent government shutdown.
"When you ask people under 30 whether they want to buy a home, they’re not planning on it like past generations," Orr noted. "Also, demand for starter homes is limited by the difficulty of first-time home buyers in qualifying for loans. Plus, less than 3% of the new homes sold in Maricopa County in October were priced below $150,000, so new entry-level homes are getting very scarce."
But the dwindling demand runs even deeper than just locally.
Investors and out-of-state buyers are losing interest in the area as well.
The percentage of residential properties purchased by investors has dropped from a peak 39.7% in July 2012 to 22.6% October 2013.