The word on the street is that at the end of 2014, the Phoenix area saw a return of real estate investors in the residential sector. In fact, investor purchases on residential property rose 16% in November.
“While investor purchases are still below the peak levels we saw in the Phoenix area after the housing crash, the levels have started to recover over the last four months,” said Michael Orr, referring to the months of August, September, October and November, 2014.
And that word has solid backing when you consider that Michael Orr is the Director of the Center for Real Estate Theory and Practice at ASU’s W. P. Carey School of Business, and publisher of The Cromford Report.
What does that mean for local real estate? It’s a mixed bag. Most investors bring cash to the table and their offers often knock out the financed offers of owner-occupied buyers (who plan to live in the home as their primary residence.) Owner-occupied buying activity creates more stability in the local real estate market in the long run, while investor activity can have the opposite effect.
On the other hand, investors returning to Phoenix could mean a quicker full recovery and more than likely an increase in housing prices since supply will be reduced because of the greater demand. But with the already low supply of homes in the Greater Phoenix area, the return of investors may cause future supply problems and possibly some bidding wars.
Following the housing bubble burst of 2007-2008, we saw homes in Phoenix and some of its surrounding areas increase significantly in price, especially during the time period between September 2011 through the summer of 2013.
While there was a 5% increase in home prices from November 2013 to November 2014, that increase is mainly due to the change in the mix of sales, as more expensive luxury homes were sold, which skewed the numbers somewhat. Looking at the big picture of 2014, Orr commented that if you take into consideration the effect on average prices from this change in the mix of sales, as well as the general level of inflation, the Phoenix area housing market remained relatively flat last year.
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The Matheson Team – RE/MAX Fine Properties
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