Arizona’s housing market is on the rise and still below pre-recession levels, while the nation’s average housing prices are one percent above those levels.
The state appears to be in a positive economic position as indicated by increased diversity, population growth and employment growth. Mark Stapp, a professor in ASU’s W.P. Carey Center for Real Estate Theory & Practice, says those are the key traits of a strong economy which drives the housing market.
“It has been really hard to climb out of the recession,” Stapp says. “Some of it has to do with wage growth. We’ve had population and employment growth, but wage growth lagged… We just got back to where we were for per capita income pre-recession and that’s in real dollars, in terms of present value.”
The housing market continues to face some of the same pressures as in years past. Stapp says there has been a lack of available developable plotted lots to build on, pushing affordable homes to the edges of city. Correspondingly, Buckeye, northwest Peoria and Pinal County are showing signs of growth. Stapp says he still sees a labor problem and an inflation in material costs which pushes housing prices up.
Post-recession saw an increase in townhouses and condos because they were more efficient to build. Stapp expects that to continue in the urban area, but it won’t be a tool to accommodate growth.
“I think our economy’s in really good shape, but we’ve adjusted to a new normal,” Stapp says. “We’re building to about equilibrium.”
Stapp doesn’t see the housing market slowing down on its path to reach equilibrium. He says that unless there’s a national economic issue or a systemic problem that will affect everybody, then Arizona should continue seeing positive signs from the market.
“Our economy’s in really good shape, and I think that translates itself into a really healthy real estate market,” Stapp says. “You see it through all the sectors.”
TED SIMONS-ARIZONA HOUSING PRICES ARE ON THE RISE, THOUGH THE NUMBERS ARE STILL WELL BELOW PRE-RECESSION LEVELS. THAT'S ACCORDING TO ANALYSIS BY CORE-LOGIC, WHICH ALSO SHOWS THAT "NATIONAL" HOUSING PRICES ARE 1% "ABOVE" THOSE PRE-RECESSION LEVELS. JOINING US NOW IS MARK STAPP OF ASU'S W.P. CAREY CENTER FOR REAL ESTATE THEORY AND PRACTICE. THANK YOU FOR JOINING US.
MARK STAPP- GLAD TO BE HERE.
TED SIMONS-THE STATE OF PHOENIX HOUSING MARKET RIGHT HERE. WHAT ARE WE LOOKING AT? I.
MARK STAPP- I THINK METROPOLITAN AREA IS IN GOOD ECONOMIC POSITION. VERY DIVERSIFIED. OUR POPULATION GROWTH HAS PICKED UP OF LATE AS EMPLOYMENT GROWTH. BOTH OF THOSE ARE THE INDICATORS OF A STRONG ECONOMY. THAT'S WHAT DRIVES THE HOUSING MARKET. I THINK WE ARE IN GOOD SHAPE. BUT I THINK WE ARE BUILDING TO ABOUT EQUILIBRIUM.
TED SIMONS- ARE WE IN BETTER SHAPE THAN A YEAR AGO? 3
MARK STAPP- I THINK WE ARE IN SIMILAR SHAPE TO A YEAR AGO. I THINK THERE ARE SOME THINGS THAT ARE AFFECTING THE MARKETPLACE AND STILL EFFECTING PRICING. WE HAVEN'T BEEN ABLE TO DEAL WITH THOSE EFFECTIVELY.
TED SIMONS- WHAT ARE THOSE THINGS?
MARK STAPP- LACK OF AVAILABLE DEVELOPABLE FOR PUBLIC LOTS OF PUBLICLY TRADED AND REGIONAL BUILDERS TO BUILD ON. THAT KEEPS DAMPER ON SUPPLY. PUSHING THEM TO THE EDGES AGAIN. THERE CONTINUES TO BE LABOR PROBLEMS THAT FEWS PRICING UP AND INFLATION OF MATERIALS COSTS. THAT PUSHES PRICING UP.
TED SIMONS-THE HOT AREAS, WHAT'S HOT AND WHERE ARE THINGS KIND OF COOL?
MARK STAPP- WELL, I THINK WE ARE SEEING A MORE EVEN DISTRIBUTION OF RECOVERY IN THE MULTIPLY. SO WE ARE SEEING DEVELOP. BACK IN AREAS WHERE IN THE PRERECESSION WE SAW IT PM BACK IN BUCK EYE. OUT IN PINAL COUNTY. THOSE AREAS ARE SHOWING STRONG GROWTH AGAIN BECAUSE THAT'S WHERE MORE A VOLUNTEEREDDABLE HOMES CAN BE BUILT RIGHT NOW.
TED SIMONS-WHAT ABOUT CONDOS AND TOWNHOMES?
MARK STAPP- STILL GOOD DEMAND FOR THEM. WE ARE NOT CHANGING THIS PATTERN THAT WE STARTED TO DEVELOP IN THE RECESSION. WE CAN'T ACCOMMODATE ALL OF OUR GROWTH THROUGH CONDOS AND TOWNHOMES. I DON'T THING WE ARE GOING TO SEE A CHANGE IN THE URBAN AREA.
TED SIMONS-The 16% BELOW URBAN LEVELS. ARE WE SO HARD TO CLIMB OUT OF THE HILL.
MARK STAPP--IT HAS BEEN. SOME HAS TO DO WITH WAGE GROWTH. WAGE GROWTH HAS LAGGED. WE STILL LAG THE NATION IN PER CAPITA INCOME. WE HAVE GOTTEN BACK TO WHERE WE WERE PRE-RECESSION WITH PER CAPITA INCOME. THAT'S IN REAL DOLLARS. IN TERMS OF PRESENT VALUE, WE ARE STILL LAGGING.
TED SIMONS- CONSIDERING THE EXPLOSIVE NATURE OF 12 YEARS AGO AND WHAT EXPLODED FROM THAT, IS IT BAD THING THAT WE ARE NOT IN RECESSION LEVELS?
MARK STAPP- NO, I THINK OUR ECONOMY IS IN REALLY GOOD SHAPE. WE HAVE ADJUSTED TO A NEW NORMAL, I THINK. WE ARE BUILDING, AS I SAID EARLIER TO QUIP. WE ARE SEEING THEM PICK UP TO 2.2%. IF YOU LOOK AT WHAT WE HAVE IN METRO PHOENIX, THERE IS GOING TO BE ABOUT 120,000 NEW PEOPLE. YOU BREAK THAT DOWN INTO -- IN THE HOUSEHOLDS. THERE IS ABOUT 25 TO 28,000 NEW HOUSEHOLDS THAT WE ARE GOING TO HAVE TO ACCOMMODATE THIS COMING YEAR. THAT'S ABOUT WHAT WE ARE BUILDING TOO. I DON'T THINK WE HAVE A BUBBLE. I THINK THERE IS A CAP ON PRICING AS A RESULT OF COSTS AND INCOME.
TED SIMONS- LET'S TALK ABOUT PRICING. AFFORDABLE HOUSING, YOU TOUCHED ON THIS EARLIER. THIS IS A ROB. HOW BIG A PROBLEM IS IT?
MARK STAPP- BIG PROBLEM. PEOPLE ARE SURPRISED WHEN THEY HEAR THAT METROPOLITAN ARIZONA AND PHOENIX HAS A HOUSING ISSUE. WE DO. RECOVERY IS OCCURRING AND PEOPLE MOVING INTO DIFFERENT PARTS OF THEIR LIFE, YOU BUILD THESE A 5 APARTMENTS. THESE A APARTMENTS THEN ADJUST THE OLD DAYS AND THEY BECOME THE BS. PEOPLE THEN MOVE INTO THOSE AND THEY PUSH OTHERS DOWN. WHAT ENDS UP HAPPENING, PEOPLE AT LOWEST LEVEL IN TIGHT MARKETPLACE GET PUSHED OUT. THEY GET DISPLACED.
TED SIMONS- THAT COMPETITION IS HUGE?
MARK STAPP- VERY BIG AND WE BUILD FAR FEWER UNITS AT THAT LEVEL BECAUSE THEY REQUIRE DISTANT SUBSIDIES. HARD TO GET THOSE. WE DON'T BUILD THE SUPPLY DOWN AT LOWEST LEVEL THAT PEOPLE SEE THE MOST.
TED SIMONS- WHAT DO YOU SEE DOWN IT ROAD? ARE THINGS GOING TO BE RELATIVELY STEADY.
MARK STAPP- I DON'T SEE ANYTHING UNLESS THERE'S A NATIONAL ECONOMIC ISSUE OR SYSTEMIC PROBLEM THAT AFFECTS EVERYBODY. OUR ECONOMY IS IN GOOD SHAPE. THAT TRAN LATES ITSELF INTO HEALTHY REAL ESTATE MARKET. MULTIFAMILY IS OVERBUILT, NOT SO. YOU DEAL WITH THAT BY BUILDING MORE UNITS. WHAT THE ISSUE IS IS THAT YOU'VE GOT A FINITE AMOUNT OF MONEY THAT PEOPLE WITH SPEND ON RENTS AND INVESTORS HAVE PUSHED THOSE RENTS UP TO THE POINT WHERE IT'S SOFT AT TOP.
TED SIMONS-RENTAL MARKET IS STRONG.
MARK STAPP- VERY STRONG.
TED SIMONS- WHAT HAPPENS IF MORTGAGE RATES STARTS JUMPING AROUND?
MARK STAPP- AFFECTS THE AFFORDABILITY. WHEN THAT HAPPENS YOU PUT MORE PRESSURE ON RENTAL MARKET. WE SEE THIS AS A NEW SEGMENT THAT IS REMEMBER DAL NEW HOME RENTAL SINGLE FAMILY DETACHED MARKETPLACE. 6 IT'S GROWING HERE IN PHOENIX. I THINK IT'S A TREND.
TED SIMONS-EVEN WITH ALL THOSE APARTMENT UNITS?
MARK STAPP- YEP.
TED SIMONS- MY GOODNESS.
MARK STAPP- INTERESTING SEGMENT WE HAVE NOT SEEN PREVIOUSLY.
TED SIMONS-WE WILL LEARN MORE ABOUT THAT AS TIME GOES ON. THANK YOU FOR JOINING US.
MARK STAPP- GLAD TO BE HERE. THANK YOU.
TED SIMONS- LATER IN THE SHOW, WE WILL HEAR ABOUT -- AND HEAR FROM -- THE PHOENIX SYMPHONY CHORUS.
Mark Stapp: ASU’s W.P. Carey Center for Real Estate Theory & Practice
