July 09, 2009

Greater Phoenix resale market sees increased investor interest

Posted: July 09, 2009

In June 2009, 11,820 resale homes recorded as being sold, while there were 9,980 recorded sales in May and 7,840 sales for a year ago. Foreclosure activity in June 2009 represented 34 percent (4,060 transactions), while there were 7,760 traditional market transactions. In the traditional market, though, approximately 50 percent of the recorded sales represent previously foreclosed property.

Foreclosure activity, as a share of total activity, is down significantly from the 51 percent (4,295 recordings) of February 2009. Since recorded sales represent decisions made in prior months, this slowdown can primarily be attributed to the various hiatus programs that lenders instituted, while awaiting the results of the various loan modifications and re-financing programs from the federal government. 

For June 2008, there were 3,275 sales in foreclosure or 42 percent on the month’s recordings. For June 2009, foreclosure activity differed throughout the Valley such as 40 percent in Goodyear, 36 percent in Mesa and 38 percent in Surprise.

Historically, June is one of the strongest months in the resale home season that usually lasts until August.  During the resale season, sales and median prices tend to increase, so some improvement in the local housing market would not be unexpected.

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.

“While there is hope that the housing troubles are beginning to ebb, the recent rise in activity, while impressive, does not necessarily represent recovery,” said Jay Q. Butler, director of Realty Studies in the Morrison School of Management and Agribusiness at Arizona State University.  

“Except for the sense of failure -- foreclosures and bankruptcies --- the current market is not much different than the 2003-2006 hyper-market for it is driven by similar-minded investors looking for the deal, especially the potential of great appreciation. It is not driven by the traditional owner-occupant looking for a place to live.

“Recovery cannot really take place until the owner-occupant looking for space is the fundamental market force and the other areas of activity -- investment and foreclosures -- return to their respective historical norms,” said Butler.  

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 June was $134,000 or down 39 percent from the $218,000 of a year ago. Foreclosed properties had a median price of $154,000 ($169,890 for June 2008). Investment interest is being driven by the anticipation that home prices will rise again in the next few years.

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.

There are two fundamental reasons why the median price for foreclosed homes is higher than traditional transactions. The first reason is more expensive homes continued to be foreclosed, with 22 being over $1 million in June, including seven over $2 million, and 4 percent of the foreclosures were in the $400,000 to $1 million range. Since most loan modification programs are designed for homes under $400,000, the increase in foreclosure activity for the upper-end market was expected.

The other reason is that, for the last year, approximately 50 percent of the traditional sales were foreclosed homes that were sold again with a median price markdown of 24 percent. The markdown varied throughout the Valley ranging from 51 percent in Maryvale to 30 percent in El Mirage to 12 percent in Tempe.

Since the greater Phoenix area is so large, the median price can range significantly. For June 2009 in North Scottsdale, the median price for a foreclosed property was $451,595 ($451,530 in May), while the traditional market was $460,000 ($435,000 in May). In South Scottsdale the splits were $180,000 ($249,105 in May) and $192,500 ($203,000 in May), respectively.

In Maryvale, traditional transactions were $48,000 ($42,000 in May) and foreclosures were $76,285 ($99,300 in May), while in Union Hills it was $210,500 ($205,450 in May) and $193,725 ($191,720 in May), respectively.  For June 2009, Paradise Valley had a median square footage of 3,825 and a median price of $1,425,000. 

Within the 1,390 total recorded sales for June 2009, the townhouse/condominium market had 510 foreclosed properties.  For a year ago, there were 855 total transactions with 230 being foreclosures. In June 2009, the median price for foreclosed properties was $112,100 while the traditional market stood at $107,000. Last year, the splits were $133,215 and $164,950, respectively.

The median square footage for a single-family home recorded sold as foreclosed in June was 1,695 square feet (1,665 for a year ago), while it was 1,765 square feet (1,865 for a year ago) for a market transaction home. In the townhouse/condominium sector, the median square footage for a foreclosed unit was 1,055 square feet (1,075 for a year ago), while the traditional market unit was 1,185 square feet (1,120 for a year ago).

 

 

June 2008-- SINGLE-FAMILY RESALE HOMES
Selected Cities Total Median Price Traditional Sales Median Price Foreclosed Sales Median Price
Phoenix 2,230 $158,100 1,070 $180,000 1,160 $144,890
Scottsdale 440 501,135 355 525,000 85 360,000
Chandler 495 248,875 360 269,900 135 195,400
Gilbert 500 246,265 345 256,000 155 227,900
Mesa 745 179,065 450 189,900 295 160,625
Tempe 150 240,000 115 245,500 35 201,595
Avondale 285 161,000 130 158,445 155 165,970
El Mirage 145 133,100 60 132,000 85 136,255
Glendale 535 182,955 280 201,000 255 164,500
Goodyear 190 186,280 110 190,000 80 179,475
Peoria 350 218,440 205 222,250 145 217,500
Sun City 110 165,000 95 160,000 15 229,075
Sun City West 60 195,000 60 195,000    
Surprise 505 175,000 285 175,000 220 175,000
             
County 7,840 $194,761 4,565 $218,000 3,275 $169,890

 

 

May 2009 -- SINGLE-FAMILY RESALE HOMES
Selected Cities Total Median Price Traditional Sales Median Price Foreclosed Sales Median Price
Phoenix 3,120 $ 80,875 2,135 $ 69,000 985 $115,720
Scottsdale 450 383,940 350 375,000 100 416,680
Chandler 455 197,500 340 198,450 115 192,316
Gilbert 555 190,000 390 185,000 165 199,485
Mesa 905 137,500 600 135,000 305 146,700
Tempe 145 169,000 110 178,000 35 161,500
Avondale 410 108,025 285 103,900 125 117,000
El Mirage 180 68,900 120 68,000 60 76,326
Glendale 735 105,000 490 97,500 245 131,275
Goodyear 300 134,900 205 129,150 95 172,200
Peoria 430 160,000 300 157,750 130 165,075
Sun City 105 141,750 85 140,750 20 158,080
Sun City West 75 180,000 70 181,250 5 157,375
Surprise 580 135,000 405 135,000 175 135,000
             
County 9,980 $135,000 6,945 $130,000 3,035 $150,090

 

 

June 2009 -- SINGLE-FAMILY RESALE HOMES
Selected Cities Total Median Price Traditional Sales Median Price Foreclosed Sales Median Price
Phoenix
3,615 $ 91,000 2,310 $ 79,000 1,305 $121,500
Scottsdale
590 376,000 430 380,000 160 357,500
Chandler
540 217,805 385 225,000 155 196,870
Gilbert
670 195,000 460 199,000 210 189,085
Mesa
1,100 130,850 705 125,000 395 151,615
Tempe
170 199,950 115 204,500 55 190,000
Avondale
440 106,000 280 99,500 160 129,000
El Mirage
230 76,750 150 70,000 80 135,735
Glendale
825 121,905 515 120,000 310 130,500
Goodyear
390 141,975 235 140,450 155 148,500
Peoria
505 165,500 330 160,000 175 172,120
Sun City
110 135,000 90 136,500 20 124,600
Sun City West
85 198,500 80 185,000 5 213,005
Surprise
665 140,000 415 133,840 250 164,365
             
County 11,820 $140,000 7,760 $134,000 4,060 $154,000

 

 

June 2008 -- TOWNHOUSE-CONDOMINUM RESALES
Selected Cities Total Median Price Traditional Sales Median Price Foreclosed Sales Median Price
Phoenix 310 $147,000 205 $154,990 105 $135,495
Scottsdale 200 221,950 170 228,900 30 184,020
Chandler 25 143,535 10 195,000 15 134,485
Gilbert 10 185,000 10 190,000    
Mesa 95 125,000 70 130,000 25 101,915
Tempe 40 154,000 30 157,500 10 141,360
Avondale            
El Mirage            
Glendale 40 113,100 20 125,900 20 106,250
Goodyear            
Peoria 15 154,960 10 167,450 5 134,260
Sun City 30 107,500 30 109,000    
Sun City West 15 131,000 15 131,000    
Surprise            
             
County 855 $151,757 625 $164,950 230 $133,215

 

 

May 2009 -- TOWNHOUSE-CONDOMINUM RESALES
Selected Cities Total Median Price Traditional Sales Median Price Foreclosed Sales Median Price
Phoenix 415 $ 96,000 250 $ 80,000 165 $114,230
Scottsdale 225 175,000 170 180,000 55 171,055
Chandler 40 106,815 30 118,250 10 99,000
Gilbert 15 114,500 10 110,000 5 145,000
Mesa 90 107,000 55 98,500 35 117,500
Tempe 45 141,500 35 130,000 10 202,500
Avondale            
El Mirage            
Glendale 55 49,000 30 35,000 25 109,900
Goodyear            
Peoria 20 84,500 15 104,750 5 82,000
Sun City 60 85,500 55 87,000 5 71,400
Sun City West 5 87,000 5 87,000    
Surprise 10 105,000 10 105,000    
             
County 1,085 $114,900 745 $110,000 340 $124,380

 

 

June 2009 -- TOWNHOUSE-CONDOMINUM RESALES
Selected Cities Total Median Price Traditional Sales Median Price Foreclosed Sales Median Price
Phoenix
540 $ 99,060 300 $ 84,950 240 $110,010
Scottsdale
285 158,000 195 170,000 90 139,085
Chandler
50 83,950 30 81,500 20 119,995
Gilbert
30 122,700 20 117,700 10 142,870
Mesa
140 80,000 85 66,000 55 103,315
Tempe
55 110,500 35 110,000 20 121,505
Avondale
           
El Mirage
           
Glendale
80 55,850 45 43,000 35 84,920
Goodyear
           
Peoria
25 97,000 20 120,500 5 58,045
Sun City
55 89,500 50 90,000 5 74,590
Sun City West
15 133,950 15 133,950    
Surprise
10 101,000 5 112,500 5 47,820
             
County 1,390 $110,000 880 $ 107,000 510 $112,100

 

 


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. Visit http://realty.wpcarey.asu.edu for more information.

Jay Butler, Jay.Butler@asu.edu
(480) 727-1300

Chris Lambrakis, lambrakis@asu.edu
(480) 727-1173
Public Affairs at ASU Polytechnic campus