The Phoenix metro area residential real estate market trends indicated a slow shift into a buyer’s market from March to April of 2014. This was a result of increased supply and competition for sellers, accompanied by stable demand. Recall that the market was in a near-balanced state at the end of October 2013. Current market conditions indicate that momentum is still shifting toward a buyer’s advantage, albeit slowly, continuing a trend that began in October. However, if the buyer’s market continues, residential real estate prices could begin to decline by the end of spring.
Taking a national view, the 2014 National Association of Realtors (NAR) Home Buyer and Seller Generational Trends study indicates optimism among young homebuyers, who perceive their homes as good investments. Among older buyers, the trends are toward downsizing to accommodate changing lifestyles.
According to Lawrence Yun, NAR chief economist, the millennial generation (under the age of 34) is now entering the peak period during which people typically buy a first home. “Given that millennials are the largest generation in history after the baby boomers, it means there is a potential for strong underlying demand,” he said. “Moreover, their aspiration and the long-term investment aspect to owning a home remain solid among young people. However, the challenges of tight credit, limited inventory, eroding affordability and high debt loads have limited the capacity of young people to own.”
A Snapshot of Residential Real Estate Trends
The NAR study also indicated that:
- Fourteen percent of all home purchases were by a multigenerational household, consisting of adult siblings, adult children, parents and/or grandparents.
- Twenty-two percent of older boomers (59 to 67 years old) and 18 percent of the silent generation (68 to 88 years old) purchased a home for a multigenerational household. The reasons cited included cost savings, caretaking and quality time. Twenty-four percent of the households were purchased because adult children moved home to save money. Twenty percent of those surveyed cited caretaking duties and 11 percent combined households to spend more time with aging parents.
- Twenty-six percent of younger boomers (49 to 58 years old) own more than one home, including investment properties and vacation homes.
- Twenty-four percent of the silent generation was more likely to buy in a small town. The majority wanted to be closer to family and friends. Twenty-six percent were also more likely to purchase in senior-related housing.
Across the country as well as in the Phoenix residential real estate market, lenders are starting to loosen up and approve buyers with weaker credit scores. That trend could help boost demand, especially among generation X and millennials. Lenders are more willing to take on some added risk as the economy gradually improves, after having tightened so much after the real estate crash in 2008. Clearly, higher interest rates may be required to mitigate the added risk; but despite those higher rates, demand and sales could improve if more prospective homeowners find their loans getting approved.