November 16, 2010

Uncertainty, foreclosures still dominate housing market

Posted: November 16, 2010
Associate Professor of Real Estate Jay Butler
W. P. Carey School of Business associate professor Jay Butler's new report shows foreclosures and the resales of previously foreclosed-on properties accounted for 65 percent of the total transactions in the Phoenix-area existing-home market last month.

Foreclosure-related activity continues to dominate the Phoenix-area housing market. A new report from the W. P. Carey School of Business at ASU shows 65 percent of the recorded existing-home transactions last month were either foreclosures or the resales of previously foreclosed-on properties.

“We’re seeing even more uncertainty in the marketplace than a month ago, including more distrust surrounding the foreclosure process,” said associate professor of Real Estate Jay Butler, who authored the new report. “The decisions leading to the reported activity in October began well before the revelation of widespread flaws in the foreclosure process. Then, with foreclosure moratoriums and weak economic and job growth heightening the uncertainty, the road to housing recovery has become rougher.”

Butler has previously stated this uncertainty could affect the availability of title insurance, the willingness of people to buy foreclosed properties, and the public perception and acceptance of the home-financing process. He believes the level of activity and prices could go lower than people generally expected as we wait for the review and resolution of problems associated with the foreclosure process and unemployment.

The Phoenix-area housing market experienced about 3,400 home foreclosures in October. That’s actually down from more than 4,100 in September and from more than 3,800 in October of last year. Butler specifically notes a reduction in the foreclosure rate among high-end homes because they are difficult for banks to resell right now.

Overall, foreclosures accounted for 42 percent of the resale housing-market transactions in October, the lowest percentage recorded since June. However, Butler doesn’t see this as an indication things are improving, but rather just part of an annual pattern.

“With children in school and the coming of the holidays, the typical pattern is for sales and foreclosures to slow through the remainder of the year,” he said.

About 4,700 homes were resold in the Phoenix area in October. That’s down from about 4,900 in September and down from more than 6,100 last October. The median price of a home resold in the Valley in October was $135,000, the same as in August and down from $140,000 last October.

In the townhouse/condominium market, about 500 foreclosures happened in the Phoenix area in October. The median price for a townhome/condo sold in October was $80,000. That’s up from $75,000 in September, but way down from $95,750 last October.

Butler’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/realestate/Phoenix-Resale-Market-Reports.cfm. More analysis is also available from Knowledge@W. P. Carey, the business school’s online resource and biweekly newsletter, at http://knowledge.wpcarey.asu.edu.

Debbie Freeman, Debbie.Freeman@asu.edu
(480) 965-9271
Communications Manager, W. P. Carey School of Business