Phoenix resale market median price down from April 2008

There were 9,100 resale homes recorded sold in April 2009, while there were 8,610 recorded sales in March and 6,395 sales for a year ago. Foreclosure activity in April 2009 represented 27 percent (2,460 transactions), while there were 6,640 traditional market transactions.

Foreclosure activity, as a share of total activity, is down significantly from the 51 percent (4,295 recordings) of February 2009. This slowdown can primarily be attributed to the various hiatus programs that lenders instituted, while awaiting the new loan modification and re-financing 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.

For April 2008, there were 2,580 sales in foreclosure or 40 percent on the month’s recordings. For March 2009, foreclosure activity differed throughout the Valley such as 30 percent in El Mirage, 25 percent in Mesa and 29 percent in Glendale.

“Historically, April is part of the resale home season that usually lasts until August,” said Butler. “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. Thus, 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 reduce 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.

“There is increasing hope that the housing troubles are beginning to ebb and the bottom, along with recovery, is in sight,” said Butler. “However, many problems continue to exist that could hinder the timing of any recovery,” he cautions.

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 April was $125,000 or down 44 percent from the $225,000 of a year ago.

Foreclosed properties had a median price of $145,965 ($181,115 for April 2008). Investment interest is being driven by the anticipation that home prices will rise again in the next few years.

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 21 being over $1 million in April, four over $2 million, and 5 percent of the foreclosures were in the $400,000 to $1 million range.

The other reason is that, for the last year, approximately  33 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 50 percent in Maryvale to 20 percent in Avondale to 10 percent in Tempe. However, since the beginning of 2009, the share of foreclosed homes has increased to slightly over 55 percent of traditional sales, with a median markdown of 25 percent.

Since the Greater Phoenix area is so large, the median price can range significantly. For April 2009 in North Scottsdale, the median price for a foreclosed property was $410,420 ($465,500 in March), while the traditional market was $450,000 ($430,000 in March). In South Scottsdale the splits were $180,980 ($190,900 in March) and $211,000 ($211,000 in March), respectively.

In Maryvale, traditional transactions were $43,000 ($39,900 in March) and foreclosures were $81,735 ($84,725 in March), while in Union Hills it was $207,500 ($199,900 in March) and $182,750 ($193,555 in March), respectively.  For April 2009, Paradise Valley had a median square footage of 3,830 and a median price of $1,325,000. 

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 955 total recorded sales for April 2009, the townhouse/condominium market had 270 foreclosed properties.  For a year ago, there were 870 total transactions with 200 being foreclosures. In April 2009, the median price for foreclosed properties was $112,250 while the traditional market stood at $116,500. Last year, the splits were $146,200 and $170,000, respectively.

The median square footage for a single-family home recorded sold as foreclosed in April was 1,650 square feet (1,680 for a year ago), while it was 1,715 square feet (1,830 for a year ago) for a market transaction home.

In the townhouse/condominium sector, the median square footage for a foreclosed unit was 1,070 square feet (1,095 for a year ago), while the traditional market units was 1,180 square feet (1,150 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