Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business at Arizona State University, says in a new report that the supply of available homes for sale has been rising fast even while demand is in decline.
There are 40% more active listings this November 1 over November 1, 2012.
At the same time demand has been declining with single-family-home sales activity dropping 19% from last October to this October.
Orr believes supply will exceed demand before the end of the year, even though supply is still 15 to 20 percent below what would be considered normal. He blames the sudden weakness partly on poor consumer sentiment, including concern over the recent government shutdown. He also notes Census numbers showing fewer households are forming, as some young adults stay with their parents and others show little interest in leaving their rentals to buy a home.
“When you ask people under 30 whether they want to buy a home, they’re not planning on it like past generations,” Orr said in a release. “Also, demand for starter homes is limited by the difficulty of first-time home buyers in qualifying for loans. Plus, less than 3 percent of the new homes sold in Maricopa County in October were priced below $150,000, so new entry-level homes are getting very scarce.”
For investors, the percentage of Phoenix-area homes purchased by investors has declined from 39.7% in July 2012, to 22.6% in October of 20123.
Orr’s full report can be downloaded here.