The ‘Boring’ Housing Market in Phoenix and the Exciting Super Bowl — It’s a Good Thing
This week Super Bowl XLIX, the biggest show on earth, will take place at the University of Phoenix Stadium in the greater Phoenix area in Arizona. This is a welcome development for the Valley of the Sun, which is seeing a resurgence in housing demand and prices.
Now the real drama will be found on the gridiron Sunday, when the Seattle Seahawks battle the New England Patriots, and not in its housing market. If anything, things are “balanced,” says John Wake, a real estate agent for HomeSmart in Phoenix who also runs the Arizona Real Estate Notebook site.
“The market is pretty much back to being fairly calm,” says Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business at Arizona State University. “Except it could use a little beefing up.”
From Boom to Bust to ‘Boring’
From 2006 to 2011, home prices in Phoenix plummeted by 56 percent, according to the S&P/Case-Shiller Home Price Index.
Then home prices rebounded in 2012 (median prices increased by 17 percent from the year before), and inventory shrunk from 60,000 homes listed for sale down to 17,000 homes.
Today, after years of manic activity, things are “boring.”
“Boring is good, very good,” says Wake. “The number of homes being sold is kind of low, but so is the number of homes hitting the market,” he adds.
Last year, 19.3 percent of Phoenix-area homeowners had mortgages that were in negative equity, according to CoreLogic. This is still a far cry from 2011 when nearly 50 percent of Phoenix-area homeowners were underwater on their mortgages.
“We are now finding ourselves in a very calm area, and as an analyst, I would like something more interesting to comment on,” jokes Orr.
Millennials to the Rescue?
Why work in the Silicon Valley when young tech entrepreneurs can find opportunity in the “Silicon Desert”?
The Phoenix area is already home to established tech companies like GoDaddy, a web-hosting company, and LifeLock, an online security firm. Smaller start-ups are beginning to sprout up, like Veebo, a Mesa-based mobile marketing firm that is co-owned by Valerie Bertinelli (best known for playing Barbara Cooper on the sitcom 1970s “One Day at a Time”).
The low cost of living and thriving start-up scene makes Phoenix “a great place to start a company,” says Tim Holladay, CEO and co-founder of Crowd Mics, an app that turns smartphones into wireless microphones during conferences and other events. But the “Silicon Desert” is still in its nascent stages. “Access to seed capital and access to talent,” says Holladay, “are the limiting factors to success here.”
A new spate of tech jobs could mean an influx of Millennials, which Orr says could translate into an influx of new renters but not new homebuyers. “The idea of home ownership actually scares them because they then will be responsible for maintaining it,” says Orr.
It hasn’t scared off Holladay: He bought a home in Mesa last year.
As far as homeownership is concerned, there are other factors that can stir things up in the Phoenix housing market, says Orr. A new policy introduced by Fannie Mae and Freddie Mac that allows lenders to give qualified borrowers loans with down payments as low as 3 percent could increase demand, says Orr. Add that to the Obama administration’s recent plan to slash Federal Housing Administration insurance premiums on mortgages with low down payments to 0.85 percent from 1.35 percent, along with an improving job market, and demand for new homes may begin to “start moving up,” he says.
In the meantime, while developments in the Phoenix area’s housing market remain relatively calm, people nationwide can hedge their bets this Sunday: Will the resurgent Seattle Seahawks maintain their winning ways in this “comeback” city — and will the “deflategate” controversy take the proverbial air out of Tom Brady’s sails? We’ll have to wait for Super Bowl Sunday to find out.