Phoenix, Arizona has experienced some of the worst effects of the recession and struggling U.S. real estate market, but the latest reports from DataQuick show signs of sales improvement in August. Although 4% off the average for sales since 1994, the number of homes sold was up 8.1% from the previous month and up 35.8% from sales of a year ago. New-home sales continue to suffer in Phoenix, but transactions involving resale homes were 15% above average for the month and highest since August 2005. As in other areas facing tough sales conditions, much of the action is driven by cash buyers and absentee investors looking for property deals, particularly distressed properties selling for less than $150,000. For more on this continue reading the following article from The Street.
Home sales in the Phoenix area surged to the highest level for an August in five years, thanks to the relatively high number of days for deals to close last month and strong investor and first-time buyer activity below $150,000. Various price measures edged lower, with the median price paid for all homes sold falling to its lowest level in more than 13 years, a real estate information service reported.
A total of 9,657 new and resale houses and condos closed escrow during August in the combined Maricopa-Pinal counties metro area. That was up 8.1% from the month before and up 35.8% from a year earlier, according to San Diego-based DataQuick, which tracks real estate trends nationally via public property records.
On average, Phoenix-area sales have changed little – a decline of 0.1% – between July and August since 1994, when DataQuick’s complete Phoenix region statistics begin.
Total August home sales fell 4.1% short of the average number sold in August since 1994, but that was only because new-home sales remained extraordinarily low last month. Transactions in the resale market last month were 15% above average for the month of August and were the highest for any August since 2005, when 14,279 houses and condos resold.
Last month’s sales picture changes a bit when viewed in terms of the average number of homes sold daily. That’s because August had 23 business days on which home sales could be recorded, compared with 20 business days in July and 22 in August 2010. The average number of homes sold daily last month fell 6.0% from July and rose 29.9% year-over-year (vs. the 8.1% month-to-month gain and the 35.8% annual gain for the total number of homes sold in the month).
Another reason it was easier to beat the year-ago sales numbers: Home sales fell off sharply beginning early last summer as federal and state homebuyer tax credits expired.
Last month’s unusually large, 35.8% annual gain in sales also reflects a sharp rise in deals below $150,000. The number of homes that sold for less than $100,000 jumped 59.2% last month compared with a year earlier, while sales below $150,000 spiked 49.7% year-over-year. Meanwhile, sales between $200,000 and $600,000 rose 15.6% year-over-year and sales of homes priced at $800,000 or more were flat compared with a year earlier.
Across all price categories, buyers last month paid a median $118,000 for all new and resale houses and condos that closed escrow in the two-county Phoenix area. That was down 1.7% from the month before and down 9.2% from a year earlier. The median has fallen year-over-year for 14 consecutive months.
The August median stood 55.3% below the all-time peak of $264,100 in June 2006.
Since last December, the median sale price has vacillated between $118,000 and $123,500 – the lowest levels since 1998. Last month’s $118,000 median was the lowest since it was $116,500 in April 1998. The median’s dramatic decline in recent years reflects several factors, including: home price erosion; heavy discounts on distressed properties; the high number of investors and cash buyers, who typically target lower-cost homes, especially foreclosures; and an unusually low%age of new-home sales. In August, just 7.9% of sales were newly built homes, which on average are more expensive than other home types. That compares with the new-home market’s 10-year monthly average of 25.4% of total sales.
Another key price gauge analysts watch, the median price paid per square foot for existing single-family detached houses, fell last month to $64, down from $65 the month before and down 9.9% from a year earlier. It was the 12th consecutive month in which the measure fell year-over-year. August’s figure was 62.6% below the $171 peak median price paid per square foot in May and June of 2006.
At the county level last month, the median price paid per square foot for resale single-family detached houses in Maricopa County was $68, down from $69 in July and down 9.4% from a year earlier. The Maricopa County median price per square foot has changed little during the first eight months of this year, ranging from $68 to $70. The Pinal County median paid per square foot was $46 in August, up from $45 in July but down 7.4% from a year earlier. The Pinal County figure has been fairly constant this year, too, ranging from $44 to $46.
The use of low-down-payment, FHA-insured mortgages – popular with first-time buyers – represented 33.5% of all purchase loans in August. That was down from 33.7% in July and 38.3% a year earlier – and well below the current cycle’s 55.3% peak for FHA loans in September 2008. FHA use has been trending lower: Last month’s figure was the lowest since April 2008.
Many buyers, especially investors, continue to pay cash for their Phoenix-area homes. Cash buyers represented 42.4% of all sales last month, up from 40.0% in July and 37.6% a year ago. The record for cash buying was 48.0% in February this year. Last month’s cash buyers paid a median $85,000, down from $86,000 in July and $95,000 a year ago. Specifically, these were transactions where there was no indication of a purchase loan recorded at the time of sale. Some of these "cash" buyers could have used alternative financing arrangements outside of a typical, recorded purchase mortgage, and in some cases they might take out mortgages after their purchases.
Absentee buyers, who are mainly investors, bought 44.1% of all Phoenix-area homes sold last month, down from 45.3% in July but up from 43.8% a year ago. The record was 47.1% this March. Absentee buyers, who paid a median $96,000 last month, can include second-home purchasers and others who indicate at the time of sale that the property tax bill will go to a different address.
Distressed homes remain a huge target for absentee buyers. Last month distressed property sales – the combination of sales of foreclosed homes and "short sales" – represented nearly 62% of the Phoenix-area resale market.
Foreclosure resales, defined as homes that had been foreclosed on in the prior 12 months, accounted for 47.6% of August resales. That was down from 49.7% in both July and a year earlier. The peak level for foreclosure resales was 66.2% in March 2009.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 13.9% of Phoenix-area resales last month. That was down a hair from 14.0% in July and down from 17.0% a year earlier. Two years ago the estimate was 12.6%.
The number of house and condo units that lenders foreclosed on in the two-county Phoenix area during August rose month-to-month but fell sharply from a year earlier. Foreclosures in August increased 9.2% from July and fell 32.7% from a year ago. During the first eight months of this year, lenders foreclosed on 39,637 Phoenix-area homes, down 6.1% from the same period last year. The foreclosure figures are based on the number of Trustees Deeds filed with county recorder offices. The document signals that a home was lost to foreclosure.
The foreclosure totals can include units that the county assessor has designated as condos, but are currently used as apartments (e.g. a 100-unit complex designated as condos but used as apartments could be foreclosed on and those units would be reflected in the foreclosure total for that month). For this reason and others, the number of homes foreclosed on has seesawed, and a single month’s increase or decline doesn’t necessarily indicate the beginning of a lasting trend.
This article was republished with permission from The Street.