A
throng of speculators, new residents, move up buyers and first-timers
is snatching up Greater Phoenix homes at a record pace, driving up
prices and raising concerns that the market is overheated.
The area's relatively low housing prices compared with other cities in
the West and steady growth are enticing all these buyers as well as
retirees, second-home shoppers and people looking for luxury estates.
Low interest rates remain the main driving engine.
"If you wait, the price will go higher and higher," said Jose
Rodriguez, who recently bought a home in Youngtown and has his eye on
another one.
That outlook has fueled record sales and the higher home values. Home
prices in parts of central Phoenix shot up 26 percent since January.
Areas of north Phoenix have seen 15 percent appreciation gains. Home
values across most of Scottsdale posted double-digit increases. North
Glendale and neighboring Peoria are experiencing their biggest price
jumps ever, and several neighborhoods in Queen Creek, Chandler and
Mesa saw housing costs climb 12 percent and higher.
Even though metropolitan Phoenix has enjoyed a decade of rising home
appreciation, the unprecedented increases in home prices in certain
areas this year have prompted some of the market's biggest boosters to
turn cautious.
"It can't go on forever, but one can't be sure when it will end,"
Arizona economist Elliot Pollack said. "These things tend to go on for
longer than anyone anticipates and you can't be sure what will cause
it to end."
Despite the caution, analysts aren't predicting a crash. They believe
the market will most likely slow gradually next year and not drop.
The rising prices have also raised concerns about the affordability of
housing. Those rising values have pushed buyers seeking affordable
homes farther out.
One of the big overall median price gainers by ZIP code is 85363 in
Youngtown, where new houses are springing up in a traditional
retirement community. The central Phoenix ZIP of 85016 is a haven for
house shoppers priced out of fast-appreciating historic neighborhoods
and the Biltmore area. And a trio of ZIPs covering the midsection of
trendy north Scottsdale and Fountain Hills has seen strong gains as
has 85305, the Glendale neighborhood containing new sports arenas and
a planned shopping hub.
Overall median increases were more muted in Pinal County, fast
emerging as the Valley's southern suburb and a place to find
affordable homes. Maricopa and Queen Creek posted double-digit
increases in the resale median and Coolidge was up strongly in its
overall median.
Helping to push sales in the Valley are buyers such as Rodriguez. He
was renting in the Valley.
He shopped the entire West Valley before buying in a Pulte Homes
subdivision in Youngtown. Rodriguez, a dispatcher for Pratte Building
Systems, had been living in an apartment but knew he wanted to buy a
house before prices shot too high.
He spotted a subdivision sign, zipped into the sales trailer and
bought a 1,250-square-foot house with three bedrooms and two
bathrooms. Even though it was his first house, the decision to get in
early before the prices shot up was the savvy move of a veteran Valley
home buyer. He paid $110,000 in May of last year and that house now
sells for $161,000.
Rodriguez never thought he'd be living in a city known for retirees
but noted that his neighborhood is a short hop to Arrowhead Towne
Center and the Glendale sports arenas. He has a move-up strategy and
has settled on a house in the same subdivision that's about double the
size of his current home and will cost about $200,000.
The quick appreciation gain of the first house will help finance the
second house that will be the new home for him and fiancee, Lori
DeCeglia, an accounts-receivable supervisor at the Mayo Clinic in
Scottsdale. Rodriguez said buyers need to move quickly once they find
something they like.
"Right now, the Phoenix market is unbelievable," Rodriguez said. "It's
a good time to buy and sell. In a couple of years, in another five
years, everything is going to start leveling out."
Mike and Stacie Marden and their toddler daughter moved to the 85021
ZIP in Phoenix, which is bisected by Northern Avenue and catches part
of Sunnyslope. They lived in the Arrowhead Ranch area of Glendale a
few years ago but wanted to be closer to central Phoenix.
"We didn't like the commute," said Mike Marden, who is an architect
working in Tempe. "But homes we looked at in North Central were either
too pricey or not worth the work it would take to fix them up."
They expanded their home search west to 12th Avenue and found a
neighborhood that had large houses and tree-lined streets, but not the
high price tags of homes closer to Central Avenue. The couple paid
about $350,000 for a home earlier this year. They're remodeling.
Other buyers have discovered the area. The overall median price of
homes in 85021 increased at least 15 percent through August, making it
one of the newest Valley housing hot spots.
Metropolitan Phoenix set a record with 47,720 building permits in 2003
and is on track to hit 50,000 for the first time this year, perhaps
challenging Atlanta as the country's top housing market. The Valley's
resale market also is hot, with 68,020 sales of existing homes through
August compared with 73,785 in all of last year and 62,625 for
full-year 2002.
Rocketing sales and rising prices have pushed the Valley's housing
market into unmapped territory, and the uncertainly about what might
happen next has given some analysts the jitters.
But people who follow home prices and sales can only speculate on
whether values have climbed too quickly, if demand is out of control
or how many homes are being bought by investors looking to dump them
for a quick profit.
The entire industry is jumpy, on the lookout for even the smallest
sign that superheated markets in other states are faltering, and ready
to lump Phoenix among them if they do. Pulte Homes' recent move to cut
prices in Las Vegas rattled Wall Street and sent home-building stocks
spinning briefly, even though some market pros saw it as a
company-specific action, not the front end of a trend.
"There's potential for a bubble," said Jay Butler, head of ASU's Real
Estate Center. " . . . I'm very concerned."
But Valley housing analyst R.L. Brown said elements of a crash aren't
there. He pointed to the fact that there's no glut of houses sitting
empty and that there is no shortage of new land to build on.
"When things are good for a while, you start looking over your
shoulder," Brown said. "You start thinking the breadlines are out
there. The point is this economy and this population has not tanked."
Maybe most frustrating for housing players is the fact that there's
plenty of evidence to argue both for and against the conclusion that
the market is spinning out of control.
The argument for:
• A flood of investor buyers and builder restrictions on sales to
them.
• Drawings for lots in new subdivisions.
• Time on market has dropped by two weeks and listings are down by
half.
• Record prices.
The argument against:
• Lots of land for new houses and builders are lining up to buy it.
• Prices still much less than other Western cities. •
Interest rates near their lows of last year.
P.J. Dean, a real estate agent with the Dean-Maldonado Group, said
buyers looking for value are shopping in neighborhoods near
established hot spots. They're buying fixer-uppers, overhauling them
and reaping gains in value as neighbors do the same.
Dean said the housing market has gone "absolutely nuts" in the past
few months, and he's not certain why.
"I'm not sure if it's due to fears of interest rate hikes or just a
no-better-time-than-the-present attitude but, nonetheless, I have seen
a huge surge in activity," he said, noting that the frenzy has spread
throughout the city.
"I have had at least two people in the past month come to me saying
that they didn't really expect to move but would sell their house for
a crazy price if they got it. They are both now moving because they
got that crazy price in a matter of days |