Greater Phoenix resale numbers show decline in prices

In October 2008, a total of 8,210 resale homes recorded as sold. Foreclosure activity represented 47 percent (3,745 transactions) and 4,465 traditional market transactions. Foreclosed transactions represent home owners losing their property to successful individual bidders or the lender of record. In September 2008, the spilt was 3,655 foreclosed homes and 4,625 traditional transactions, while recorded sales in October 2007 was 1,145 and 2,825, respectively. Historically, the remaining months of the year tend to post slowing recorded activity. The 2008 year-to-date total is 39,055 traditional sales and 28,755 foreclosures.

Foreclosure activity differs throughout the Valley such as 43 percent in Surprise, 32 percent in Tempe and 50 percent in Avondale. Over the next few months, recorded foreclosure activity could decline because of the response to various mortgage modification programs offered by lenders and government agencies to assist troubled homeowners, according to Jay Butler, director of Realty Studies in the Morrison School of Management and Agribusiness at Arizona State University Polytechnic.

“The fundamental issue is that most of the programs are based on the homeowners having decent income to support the modified mortgage,” he said. “However, the extremely weak economy is leading to mounting job losses that could severely impact the ability of a troubled household to have the needed income to qualify for one of the possible programs.

“While many will be helped, other households will confront not only job loss but the loss of their home. Thus, the desire and ability to maintain ownership or to purchase a home is being severely tested, which will further delay any potential recovery,” Butler said.

“The local housing market will continue to be vexed well into the next year by eroding consumer confidence, brought on by a weak economy, possible job losses and tighter mortgage underwriting guidelines.”

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 was $175,000, while the foreclosed properties had a median price of $159,775. For a year ago, the median prices were $250,000 and $218,225, respectively. Investment interest is being driven by the anticipation that home prices will rise again in the next few years. The lower median price is being driven by several forces including the large number of vacant homes, especially in certain neighborhoods.

Since the greater Phoenix area is so large, the median price can range significantly. In North Scottsdale, the median price for a foreclosed property was $495,000, while the traditional market was $525,000. In South Scottsdale the splits were $209,550 and $240,000, respectively.

In Maryvale, traditional transactions were $71,500 and foreclosures were $117,145, while in Union Hills it was $249,950 and $194,340. 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 850 total recorded sales, the townhouse/condominium market had 355 foreclosed properties. A year ago the split was 695 for traditional sales and 80 for foreclosed sales. In October 2008, the median price for foreclosed properties was $119,375, while the traditional market stood at $136,750. Last year, the respective splits were $150,720 and $173,500.

The median square footage for a single-family home recorded sold as foreclosed was 1,650 and 1,765 square feet for a market transaction home. For October 2008, Paradise Valley had a median square footage of 3,450 square feet and a median price of $1,324,000. For a year ago, the foreclosed market was at 1,785 square feet and the traditional market stood at 1,750 square feet. In the townhouse/condominium sector, the median square footage for a foreclosed unit was 1,075 square feet (1,175 square feet for year ago), while the traditional market units was 1,185 square feet (1,035 square feet for a year ago).

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. To subscribe to RSS feed for Realty Studies news, visit http://www.poly.asu.edu/realty/rss.html.

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

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