Condos, townhomes fuel rise in 2014 Phoenix-area home prices

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By Mike Gertzman By Mike Gertzman

TEMPE, Ariz, -- Prices for single-family homes in the Phoenix area rose 5.4 percent in 2014, according to a report from the W.P. Carey School of Business at Arizona State University. But that was minuscule compared with the median sales prices of townhomes and condominiums.

"The most promising signs in 2014 were for townhomes and condominiums, where both sales volumes and prices were higher than expected," says the report's author, Mike Orr, director or the Center for Real Estate Theory and Practice at the W. P. Carey School of Business.

The median sales price for single-family home sales price rose from $204,000 to $215,000 from December 2013 to December 2014, according to the report.

Demand for townhomes and condos strengthened, and the median sales price for those types of homes went up 15 percent in 2014, from $123,900 to $142,000, according to the report.

Demand for rental homes also remained strong, according to the report.

"Demand is shifting away from single-family homes and toward smaller attached homes that are easier to maintain and to 'lock and leave.' Growing numbers of baby boomers, whose children have grown up and left, are downsizing. Many millennials also seem to show a preference for smaller, easy-to-maintain homes in central locations."

Orr said that mid-range and luxury homes continue to do relatively well in the Phoenix market, while it's tougher to find homes priced below $150,000. The amount of single-family home sales overall was up 3 percent from December 2013 to December 2014.

But the supply level remained low, the report noted. The number of active listings available on Jan. 1, 2015 was down 3 percent from Jan. 1, 2014.

Fewer "distressed" homes came onto the market, with completed foreclosures down 42 percent from December 2013 to December 2014. That lack of cheap inventory is keeping investor interest significantly lower than it was during the initial housing recovery, according to the report.

Other home buyers weren't filling the gap, but there might be a positive turn soon, Orr said.

"We anticipate a modest increase in sales in 2015, as compared with 2014," Orr said. "The primary increase in demand is likely to come from boomerang buyers who have repaired their credit after foreclosure or short sale several years ago."

Multifamily units and rental homes continue to command local attention, according to the report. The multifamily vacancy rate for the end of 2014 was at an all-time low, and multifamily construction permits have been on a strong upward trend. Rental homes were seeing relatively fast turnover and low vacancy rates, and as a result, rents were up 6.8 percent in the Phoenix area over the past 12 months.

Orr said some Canadians might decide to lock in profits made on Phoenix-area homes bought since the housing crash.

In 2014 alone, the prices went up an additional 15 percent when converted to the Canadian dollar.