Mike Orr, director of Arizona State University's real estate center, has had a front-row seat for the dramatic transformation of the Arizona capital from arguably the most depressed real estate market in the country during the housing bust to the most dynamically expanding market today.
While Phoenix was once drowning in foreclosures, today there is a shortage of bargain properties because investors appear to have soaked up most of the supply, particularly of more affordable homes priced at less than $150,000, he said.
Nearly 4 out of 5 homes available are priced at more than $150,000, "creating a real problem in the lower range," Mr. Orr said. "First-time homebuyers face tough competition from investors and other bidders for the relatively small number of properties available in their target price range."
Mr. Orr estimates that the median home price in Phoenix has surged by 36.5 percent since hitting bottom a year ago, but even that has not done much to encourage people to put their homes on the market and alleviate the shortage of homes available for buyers of modest means.
"Higher prices would normally encourage more ordinary home sellers to enter the market, but it seems many potential sellers are either locked in by negative equity and/or staying on the sidelines, waiting for prices to rise further," he said. "At some point, we will reach a pricing level where resale supply will free up, but we are not there yet."
Meanwhile, with fewer distressed properties coming on the market, investor interest in the Phoenix area appears to be waning. Mr. Orr said investors appear to be migrating to other markets around the country that have yet to see such dramatic price increases.
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