Why Phoenix is NOT headed for another housing bust Rumors have been percolating lately that the rapid rebound of the metro Phoenix housing market may soon lead to another bust. Arizona State University’s Michael Orr, on the other hand, thinks that notion is ludicrous — so much so that he carved out a new section of his latest monthly housing report to debunking it. The speculation refers to the thousands of metro Phoenix homes that were scooped up by small and large institutional investors during the downturn. Many of those properties have since been flipped into income-generating rentals, largely providing housing for those who lost their homes during that time. But for the past year or so, Valley home prices have been rebounding much faster than anyone had previously predicted. Orr’s latest report, released Monday, indicated a 30 percent year-over-year spike in the Valleywide median home price in April. Some now fear that the price surge will entice those same investors to soon dump those properties back on the market all at once. But Orr believes the impact that investors have had, and could have, on the market is largely overstated. “Such talk gets a lot of attention because we are over-sensitized to bubble talk after the disruptive events of 2004 to 2006,” Orr said in the report. “However, this idea falls flat when we examine the actual number of homes involved.” Investors went on a “buying spree” when foreclosures and short sales began flooding the market several years ago. Institutional investor activity peaked last summer — New York-based Blackstone Group LP being the most active by far — but has since waned as prices have increased, foreclosures have taken a nosedive and there’s a severe shortage of homes for sale. In total, institutional investors own between 10,000 and 11,000 rentals today, which Orr noted is less than 1 percent of the Valley’s entire housing stock. “If every single one were to be placed for sale on our local (Multiple Listing Service) next month, we would still have less supply than in a normal balanced market,” Orr said. “This is because our active listing count is down by about 15,000. We would also need to find homes for the tenant families displaced. In the real world, these rental homes are likely to be held as investment properties for several years and come back onto the market relatively slowly.” Kristena Hansen Reporter- Phoenix Business Journal
Posted on: Fri, 14 Jun 2013 16:38:43 +0000
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