Prior to 2007, home foreclosures played little to no role in the local real estate market. In fact only agents of our advanced years recalled the late 80’s, when the Savings and Loans went under and the resulting foreclosures flooded the market. History has a way of repeating itself and so it was in August of 2007 when the “Mortgage Meltdown” occurred, resulting in the return of the foreclosed home. What began primarily in the outlying communities (the “drive until you qualify communities”) spread rapidly until no neighborhood remained untouched. So pandemic was this wave of foreclosures that it quickly became our “new normal”. The danger of this kind of normalcy is that, well, it isn’t normal. Eventually, given enough time, the number of foreclosures will drop until they no longer are a factor in the marketplace. In short, at some point all the foreclosures will have happened – it is not an inexhaustible supply.
In fact, from January of 2006 through March 2011, Maricopa County has recorded 167,621 Trustee sales. Of those sales, 138,235 have been single family residences. To put this in perspective, there are 1,009,755 single family residences in Maricopa County. 13.7% of single family homes have been through a trustee sale. The zip code with the lowest percent of foreclosures is Sun City West with only 1.3%. The highest percent of foreclosures is 35% in the Phoenix zip code of 85043. For those of you who would like to see the breakdown of foreclosures by zip code, click here. Our thanks again to Michael Orr of the Cromford report for these statistics.
On a cheerier subject, real estate sales in the valley continued their strong pace. For only the fourth time ever in a month, residential sales were over 10,000 this March. For perspective, the three other months of sales over 10,000 were: June 2004, June 2005 and August 2005.
Single family detached homes consisted of 8,350 or 84% of the 10,000 sales. Seventy-seven percent of all single family sales were under $200,000. There were 862 single family sales under $50,000 and a whopping 90% of those were purchased with cash.
When combining all residential sales, 43% were lender-owned sales (REOs), 19% were short sales and 38% categorized were neither a short sale nor a lender-owned sale, though many of sales in the other category were recent lender-owned sales that were fixed and flipped.
Not surprisingly due to the high rate of displaced homesellers, the single family rental market remained hot with only a 1.5 month supply of single family rentals in Greater Phoenix.
Looking at the numbers and the implication for the immediate future, Michael Orr had this to say:
“With the balance between supply and demand changing quite quickly for the better over the last four months, we are down to an overall inventory level of 4.2 months based on the monthly sales rate. This can be regarded as a “normal” reading for the time of year (it is below the 4.5 we measured in 2002 at the same point in our last “normal” year). This goes a long way towards explaining why prices have stabilized once again.
Currently the trend is for supply to fall further and demand to increase, and if this continues then at some point it is likely to lead to prices moving higher. How soon and how much, it is too early to say. However it is not too early to say that prices are unlikely to fall to any significant degree while this situation persists. Last year the disappearance of the tax credit at the end of April caused the market to deteriorate suddenly in May and pricing fell sharply between July and September. At the moment we see no indication of a similar interruption to the recovery process that is now under way.”
Recovery! What a long awaited concept. We welcome it.
Russell & Wendy Shaw