By Philip Haldiman, Editor-in-Chief | The Dealmaker
When it comes to real estate in Arizona, it’s time to move from relief to optimism.
That’s what one well respected local expert has to say about the industry moving into 2015.
Mike Orr, director of the Real Estate Center at Arizona State University, said unexpected things can happen to affect the economy but there’s no need to worry about the housing market.
In the coming years, demand and supply will grow and residential rates will increase in most areas, Orr said.
“The economy and jobs are improving,” he said. “We don’t have to worry about loan delinquency. Supply is well below normal. Demand is weak but climbing. Foreclosures are the lowest in 15 years. Lending rules are starting to loosen and Millennials are starting to have children.”
Orr spoke at “Phoenix Housing Market Explained III,” presented by the Real Estate Council at the ASU W.P Carey School of Business and The Arizona Republic and azcentral.com, Jan. 17.
Mark Stapp, director of the school’s Master of Real Estate Development program, and Catherine Reagor, The Arizona Republic’s real estate reporter, also spoke.
“Demand is matching supply, and to many that’s not a good thing,” Stapp said. “But we’ve achieved homeostasis and we’re marching along slowly.”
A number of real estate topics were covered including lending, infill projects, job growth and wages.
Some of the conversation centered on the buying power of Millennials and when they would enter the market.
Stapp said Millennials are concerned because of what they’ve had to watch their parents go through, but eventually they will buy. Younger adults work more on contract basis than their parents did at their age and they don’t work for the same employer as long as their parents did.
These things affect the housing market, but the fundamentals of the economy still work same — it’s people’s responses that are different, Stapp said.
“(Millennials are) scared, but it will play out,” he said. “It’s different today. The employer and employee contract is broken. This changes people’s behavior and affects everybody.”
Orr said Millennials are having kids older.
“Even if they could afford a home right now, they still would not buy. Instead, they would take a year off and go to Thailand,” he said. “But there is a strong correlation between having your first kid and buying a home.”
While most Millennials haven’t taken that big step of buying their first home, the market is responding to their buying power.
Reagor said Millennials want the amenities of urban living, which includes being able to walk to retail and restaurants, as well as easy access to mass transportation.
Because of this, infill sights are selling and vacant parcels in central Phoenix, such as the long-empty 5.46-acre site on the northwest corner of Central Avenue and McDowell Road, are being snatched up for development.
Other areas of the Valley, such as Mesa, are also becoming more urbanized.
“The downtown and mid-town residential markets in Phoenix are doing well,” Reagor said. “People are taking advantage of the light rail in Phoenix and Mesa, which didn’t take off quickly, but now is definitely making an impact.”
Stapp said people will feel more comfortable entering the housing market when they are making more money. He said there has been good job growth but wages are flat, which makes affordability difficult.
The state needs more high-income jobs and amenities that will make Arizona more attractive, he said.
“We need more investment in arts, education, culture and infrastructure,” Stapp said. “That’s what we should be investing in.”
