Phoenix Housing Market Rebounds in May

One of the most troubled U.S. housing markets saw a sharp increase in home sales in May. More than half of the buyers of Phoenix homes were absentee …

One of the most troubled U.S. housing markets saw a sharp increase in home sales in May. More than half of the buyers of Phoenix homes were absentee investors, likely attracted to aggressive discounts on distressed or bank-owned properties, which accounted for more than 64% of sales. Although May’s home sales are good news and even the number of foreclosures also dropped for the month, analysts note that new-home sales remained low as construction prices rise and people search for bargains. For more on this continue reading the following article from The Street.

Phoenix-area home sales rose in May, when resales of single-family houses hit the highest level for that month in six years amid near-record levels of investor purchases.

The region’s median price remained at essentially the same level at $120,000 that it’s been at the past six months as distressed property sales continued to account for around two-thirds of the resale market. The median price dropped sharply from a year earlier, however, as the number of homes selling below $100,000 shot up nearly 41 percent year-over-year, a real estate information service reported.

A total of 9,837 new and resale houses and condos closed escrow during May in the combined Maricopa-Pinal counties metro area. That was up 0.8 percent from the month before and up 4.9 percent 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 risen 5.2 percent between April and May since 1994, when DataQuick’s complete Phoenix region statistics begin.

May’s total sales were the highest since 2007, when 10,112 homes sold, and were 8.6 percent short of the average number of May sales since 1994. However, the number of existing resale single-family detached houses that sold in May was the highest for that month since 2005, while resales of condos were the highest for a May since 2006. The new-home market remained troubled, however, with sales at the lowest level for a May in 14 years.

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Sub-$100,000 home sales, which rose 40.8 percent from a year earlier, represented 39.7 percent of all May transactions, compared with 28.8 percent a year earlier.

In May, 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 the same as the month before but down 13.7 percent from a year earlier. The median has fallen year over year for 11 consecutive months.

The May median was 14.2 percent below the highest median recorded over the past year –$139,900 last June — and it stood 54.6 percent lower than the all-time peak of $264,100 in June 2006. For the past six months the median has vacillated between $119,000 and $120,000 — the lowest levels since late 1998. This reflects several factors, including recent home price erosion; the high numbers of investors, who target lower-cost homes, especially foreclosures; and an unusually low percentage of new-home sales coupled with an above-average share of existing (not new) condo sales.

In May 6.8 percent of sales were new homes, which on average are more expensive than other home types, compared with 10.1 percent a year ago and a 10-year monthly average of 26 percent of sales. Resale condos, which tend to be the most affordable home type, made up 12.6 percent of May’s transactions, compared with 10.7 percent a year ago and a 10-year monthly average of 10.0 percent.

Absentee buyers, who are mainly investors, purchased 45.3 percent of all Phoenix-area homes sold in May, down from 46.3 percent in April and a record 47.1 percent in March, but up from 37.8 percent a year earlier. Absentee buyers, who paid a median $101,000 in May, 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.

Cash buyers represented 42.0 percent of all sales in May, down from 44.5 percent in April and a record 48.0 percent in February, but up from 34.4 percent a year ago. May’s cash buyers paid a median $90,000, down from $91,900 in April and $112,9500 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.

Foreign buyers purchased roughly 6 percent of the Phoenix-area homes sold in May, based on a review of public property records where foreign addresses were available. Of the foreign buyers that could be identified, about 93 percent were from Canada. Australia was the next-most-common country, representing about 3 percent of the buyers with a foreign address. Foreign buyers paid a median $115,000 for resale houses, $95,400 for condos and $146,103 for newly built homes.

U.S. buyers from outside of Arizona bought nearly 20 percent of all homes sold in the Phoenix area in May, and represented about 46 percent of all absentee purchases. Buyers from California represented the largest out-of-state buyer group, accounting for 8.9 percent of all absentee buyers and nearly 20 percent of the out-of-state absentee buyers.

In May, distressed property sales – the combination of sales of foreclosed homes and "short sales" – edged higher, to more than 64 percent of the resale market.

Foreclosure resales, defined as homes that had been foreclosed on in the prior 12 months, represented 50.8 percent of May resales. That was up from 50.6 percent in April and 50.0 percent a year earlier. The peak level for foreclosure resales was 66.2 percent in March 2009. Short sales, transactions where the sale price fell short of what was owed on the property, made up an estimated 13.7 percent of Phoenix-area resales in May. That was up from an estimated 12.4 percent in April but down from 14.9 percent a year earlier. Two years ago the estimate was 8.1 percent.

Foreclosures fell month-to-month. Lenders foreclosed on 4.832 house and condo units in the two-county Phoenix area during May, down 8.5 percent from April but up 5.6 percent from a year earlier. During the first five months of this year, 27,112 homes were foreclosed on, up 7.0 percent 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.

This article was republished with permission from The Street.

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