Sales of homes below $100,000 coupled with the brisk purchase of distressed homes is encouraging a downward shift in price as new homes and properties unmarred by credit problems fail to compete with the glut of bargains in the Phoenix residential real estate market. Absentee and cash investment buyers make up a large segment of the market, snapping up foreclosures and short sales that are dragging the median resale home sale price down to $105,000. Those not buying in cash are predominately using federally backed loans provided by the Federal Housing Administration, although they remain far below the peak seen in 2008. For more on this continue reading the following article from The Street.
Home sales fell sharply in the Phoenix area last month compared with June but were still 19% higher than a year earlier – a period when the market had stalled following the expiration of federal homebuyer tax credits. Home price measures trended lower last month as sub-$100,000 sales accounted for a higher share of all activity and distressed property sales accounted for nearly two-thirds of the resale market, a real estate information service reported.
A total of 9,050 new and resale houses and condos closed escrow during July in the combined Maricopa-Pinal counties metro area. That was down 13.2% from the month before but up 18.9% 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 fallen 7.1% between June and July since 1994, when DataQuick’s complete Phoenix region statistics begin. The larger-than-usual drop in sales between June and July this year was likely the result of more potential homebuyers getting nervous about the worsening economic news, as well as concerns at the time that political leaders in Washington D.C. wouldn’t find a way to avoid a default on U.S. obligations.
Total July home sales fell 7.1% short of the average number of homes sold in July since 1994, but that was only because new-home sales were so low – the second-lowest for a July in 14 years. The resale market fared much better: Last month sales of existing (not new) single-family detached houses and condos combined rose 20.6% above a year ago and were 8.7% above average for a July. Last month’s 8,402 resales were the highest for a July since 2009 and the second-highest since July 2005, when a record 13,540 homes resold.
Last month’s nearly 19% year-over-year gain in sales was mainly the result of big annual increases in deals below $150,000, which rose 27.6% from July 2010. The number of homes selling below $100,000 last month jumped 43.2% above a year earlier. In July, 39.8% of the homes sold for less than $100,000, compared with 38.7% in June and 32.5% in July 2010.
Last month buyers paid a median $120,000 for all new and resale houses and condos that closed escrow in the two-county Phoenix area. That was down 2.4% from the month before and was down 9.1% from a year earlier. The median has fallen year-over-year for 13 consecutive months.
The July median stood 54.6% below the all-time peak of $264,100 in June 2006.
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Over the seven months leading up to this July the median had vacillated between $119,000 and $122,900 – the lowest levels since late 1998. This reflects several factors, including: recent home price erosion; 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 July, just 7.2% of sales were newly built homes, which on average are more expensive than other home types, compared with 8.4% a year ago and a 10-year monthly average of 25.6% of sales.
Another key price gauge analysts watch, the median price paid per square foot for existing single-family detached houses, dipped last month to $65, down from $67 the month before and down 9.7% from a year earlier. It was the 11th consecutive month in which the measure fell year-over-year. July’s figure was 62.0% 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 $69, down from $70 in June and down 9.6% from a year earlier. The Maricopa County median price per square foot has changed little during the first seven months of this year, ranging from $68 to $70. The Pinal County median paid per square foot was $45 in July, the same as in June but down 12.0% 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 33.6% of all purchase loans in July. That was down from 34.7% in June and 40.6% a year earlier, and well below the peak for FHA loans – 55.3% in September 2008. FHA use has been trending lower: Last month’s figure was the lowest since this February and the second-lowest since April 2008.
Many buyers, especially investors, continue to pay cash for their Phoenix-area homes. Cash buyers represented 40.3% of all sales last month, down from 40.7% in June and a record 48.0% in February, but up from 37.6% a year ago. Last month’s cash buyers paid a median $86,000, down from $89,000 in June and $100,000 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 45.4% of all Phoenix-area homes sold last month, up from 44.3% in June and 41.9% a year ago, but down from a record 47.1% this March. Absentee buyers, who paid a median $98,010 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.
Nearly 41% of all absentee buyers who purchased in the Phoenix area last month were based elsewhere in the United States. Buyers from California represented the largest out-of-state buyer group, accounting for 9.6% of all absentee buyers last month, followed by Washington (4.2% of absentee buyers) and Colorado (2.1%). Absentee buyers based in California represented 4.4% of total Phoenix region July home sales.
Foreign buyers purchased roughly 4.3% of the Phoenix-area homes sold in July, based on a review of public property records where foreign addresses were available. Of the foreign buyers that could be identified, about 90% had mailing addresses in Canada. Australia was the next-most-common country, representing about 5.6% of the buyers with a foreign address. Foreign buyers paid a median $105,000 for resale houses, $83,500 for resale condos and $185,000 for newly built homes.
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 64% of the Phoenix-area resale market.
Foreclosure resales, defined as homes that had been foreclosed on in the prior 12 months, represented 49.8% of July resales. That was up from 49.6% in June but down from 50.5% 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 14.0% of Phoenix-area resales last month. That was down from an estimated 14.2% in June and down from 15.5% a year earlier. Two years ago the estimate was 11.6%.
The number of house and condo units that lenders foreclosed on in the two-county Phoenix area during July fell sharply from both June and a year earlier. Foreclosures declined 22.3% from June and 34.6% from a year earlier. During the first seven months of this year, 35,585 Phoenix-area homes were foreclosed on, down 2.6% 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.