The Valley’s Shrinking Housing Inventory

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Experts talk about the declining inventory of homes for sale in the Valley of the Sun.

Ted Simons: The valley's housing market suffered from a glut of homes in recent years. But the opposite is now true, and that's making it tougher on home-buyers. Mike Sauceda has more on the story.

Mike Sauceda: Cristal Romney of Arizona wants her own home so she can move out of her sister's place. She's taking a tour of a place in Gilbert, Arizona. It has a good credit rating and a 20% down payment but it's been difficult to find a home.

Cristal Romney: It's very frustrating to buy a home because when I look at the house that I want, I put off a house that has multiple offers, I go way above the listing price and it goes for more than what I offered.

Mike Sauceda: Phoenix-area realtor Eric Nyquist say Romney's experience is not unique.

Eric Nyquist: I am seeing the market tightening up. There are less homes for buyers, which is creating a buying frenzy on properties.

Mike Sauceda: That frenzy is being fed by a shrinking housing inventory in the phoenix area that has fallen from 58,000 homes in 2008, which would be a 19-month supply at average sales rates. However, 8,000 homes are being sold monthly now and 16,000 homes on the market that are not under contract represent just the two-month supply. Demand is high enough for houses priced under $600,000 that they're receiving several offers the day they go on the market. While some areas have yet to see foreclosed houses on the market, that's unlikely to ruin the housing market. According to Michael Orr, the head of the Arizona real estate center and Arizona State University's W.P. Carey School of Business.

Michael Orr: The idea that the banks own homes that are secret and in a shadow inventory is amusing because the banks cannot get the home without the owner knowing about it. It's a matter of public record they record the deed at the county.

Mike Sauceda: Although the shrinking housing supply signals a housing recovery, it also depends on the willingness of banks to loan money. Mike Thorell is president of Pinnacle Bank in Scottsdale. A community bank with one branch. Half of its lending is to small businesses. The other half to home buyers.

Mike Thorell: I would harken back to the days when I started in banking. It took a real highly, highly qualified person to get a 5%, 10% down mortgage. We're there and maybe more.

Mike Sauceda: Thorell says there are two factors that may keep mortgage money from flowing into Arizona. First, local and regional lenders are stepping up in the absence of aggressive lending by the mega-banks.

Mike Thorell: It now has been very clearly represented that you've got to be careful and you're seeing a lot of the national lenders not fully embracing coming back into the state to make loans and they're being extremely careful.
Mike Sauceda: Another factor are Arizona laws preventing banks from going after home-owners, or any money owed on a home, after the home has been foreclosed on and sold. Mortgages are not a factor in many housing transactions in the Phoenix area. 40% of homes sold here are being bought with cash, even as median prices have turned higher. Last summer, phoenix median home prices fell to $108,000. In February, that had jumped to $122,000. Orr of Arizona State University points out, rising prices and shrinking inventories will help those underwater on their mortgages come up for a breath.

Michael Orr: That will probably have a beneficial effect on the local economy because people will be more confident that they're not losing value in their homes anymore. If they're underwater, or not underwater by much. And I think it's going to spur home builders to try to patch up with the shortage and create jobs in the construction industry and everything that goes around that.

Ted Simons: The shrinking housing inventory is starting to show up in phoenix-area home prices as we discussed early this week, phoenix is just one of three markets that saw a year-to-year increase in prices from January 2011 to January of this year.

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