Phoenix Real Estate Resale Market – Foreclosures Drop

MESA, Ariz. – There were 8,610 resale homes recorded sold in March 2009, while there were 8,510 recorded sales in February and 5,320 sales for a year ago. Foreclosure activity in March 2009 represented 31 percent (2,670 transactions), while there were 5,940 traditional market transactions.

Foreclosure activity, as a share of total activity, is down significantly from the 51 percent (4,295 recordings) in February 2009. The slowdown can primarily be attributed to the various hiatus programs that lenders instituted, while awaiting the new loan modification and refinancing programs from the federal government, according to Jay Butler, director of Realty Studies in the Morrison School of Management and Agribusiness at Arizona State University’s Polytechnic campus.

Historically, March is the portal month for the resale home season that usually lasts until August, said Butler.

Greater Phoenix Real Estate resale market experiences drop in foreclosures as lenders take hiatus.

In March 2008, there were 2,055 sales in foreclosure or 39 percent on the month’s recordings. For March 2009, foreclosure activity differed throughout the Valley, such as 40 percent in El Mirage, 28 percent in Gilbert and 28 percent in Scottsdale.

“During this time, sales and median prices tend to increase as the buyers move to lock in a purchase before the start of schools and the holiday times. So, some improvement in the local housing market would not be unexpected,” he said.

Although mortgage interest rates and prices are attractively low, tighter underwriting standards, a weak economy and poor job market, including job losses and lost income through reduced pay and furlough programs, could place sever obstacles before the potential of the market. The impact of foreclosures on the market has been the primary concern of the last year and will continue to be in the coming months, especially with the end of many hiatus programs and the weak job market.

“The fundamental mitigating factor could be the various existing and potential loan modification programs that will allow households to save their homes,” said Butler. “Thus, there is increasing hope that the housing troubles are beginning to ebb and the bottom, along with recovery, is in sight. However, many problems continue to exist that could hinder the timing of any recovery.”

The declining prices have piqued interest for potential investors and owner-occupants, especially in the lower income ranges. For the traditional market, the median price in March was $127,000, down 45 percent from the $229,900 for a year ago. Foreclosed properties had a median price of $146,880 ($189,170 for March 2008).

Investment interest is being driven by the anticipation that home prices will rise again in the next few years. According to Butler, there are two fundamental reasons why the median price for foreclosed homes is higher than traditional transactions.

“The first reason is more expensive homes continue to be foreclosed, with 15 in March, three over $2 million, and 7 percent of the foreclosures were in the $300,000 range,” he said. “The other reason is that, for the last year, slightly more than 30 percent of the traditional sales were foreclosed homes that were sold again with a median price markdown of 15 percent. The markdown varied throughout the Valley ranging from 44 percent in Maryvale to 17 percent in Avondale to 10 percent in Tempe.”

Since the Greater Phoenix area is so large, the median price can range significantly. For March 2009 in North Scottsdale, the median price for a foreclosed property was $465,500 ($413,643 in February), while the traditional market was $430,000 ($511,765 in February). In South Scottsdale the splits were $190,900 ($200,000 in February) and $211,000 ($195,000 in February), respectively.

In Maryvale, traditional transactions were $39,900 ($40,000 in February) and foreclosures were $84,725 ($115,540 in February), while in Union Hills it was $199,900 ($205,000 in February) and $193,555 ($201,400 in February), respectively. For March 2009, Paradise Valley had a median square footage of 3,945 and a median price of $2,061,895.

While lower prices can greatly improve affordability, they can adversely impact many owners and potential sellers whom are watching their limited equity erode, as prices decline to and even below existing debt level. Rapidly declining value can be another issue in some of the mortgage modification programs which require a limited decline in value from the purchase and financing of the home.

Within the 900 total recorded sales for March 2009, the townhouse/condominium market had 295 foreclosed properties.  For a year ago, there were 700 total transactions with 130 being foreclosures. In March 2009, the median price for foreclosed properties was $105,075 while the traditional market stood at $115,000. Last year, the respective splits were $144,210 and $170,750

The median square footage for a single-family home recorded sold as foreclosed in March was 1,700 and 1,715 square feet for a market transaction home. For a year ago, the foreclosed market was at 1,705 square feet and the traditional market stood at 1,820 square feet. In the townhouse/condominium sector, the median square footage for a foreclosed unit was 1,010 square feet (1,110 square feet for year ago) while the traditional market units was 1,205 square feet (1,135 square feet for a year ago).

Realty studies

Realty Studies is associated with the Morrison School of Management and Agribusiness at Arizona State University’s Polytechnic campus. Realty Studies collects and analyzes data concerning real estate in the greater Phoenix metropolitan area. Realty Studies is a comprehensive and objective source of real estate information for private, public and governmental agencies.  Its director, Dr. Jay Q. Butler, may be reached at (480) 727-1300 or e-mail him at Jay.Butler@asu.edu <mailto:Jay.Butler@asu.edu> . To subscribe to RSS feed for Realty Studies news, visit http://www.poly.asu.edu/realty/rss.html .

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