Phoenix Struggles to Rise Again
Ah, Phoenix—the land of golf courses, resorts, and plentiful foreclosures! The city is the capital of Arizona, which has held steady atop the list of foreclosure-ridden states, so it should be no surprise to anyone that distressed listings make up a good chunk of the Phoenix homes for sale. But lately the housing market in Phoenix has seen some stirrings of life.
Phoenix was hit hard by the housing market crash, and many parts of the city are still saddled with new foreclosure filings, but there are a handful of zip codes where the saturation of foreclosures is slowly ceding.
Bucking Conventional Economics
October saw a nearly 10 percent drop from September in new foreclosures (the lowest monthly total since March 2008), inspiring hope in many economists about Phoenix’s recovery. Sales were up for the sixth straight month, with about 40 percent of those sales being repossessed homes. If that sounds like a high number, consider that in October of 2010, 54 percent of homes for sale in Phoenix were the result of foreclosure.
Data from ZipRealty
As you can see from the chart above, inventories have been cruising downward for the last year and seem to be hitting a bottom. Normally, when inventory (total homes for sale) is gobbled up, and sales are up, prices begin to lift. Conventional economic theory says that when supply goes down, demand and prices go up, but Phoenix appears to be bucking this trend.
Low prices may be persisting because of the uptick in short sales. Jon Prior of HousingWire points out, “Most of the activity occurred for homes that sold for less than $100,000. Sales in this bracket spiked 22 percent from last year, keeping the median price down for the entire metro.”
Both Prices and Foreclosures Rise in November
During last month, foreclosures were up to 29 percent (up from 26 percent in October) of existing-home transactions. While not welcome news, this was only the second monthly rate increase during 2011. And unemployment is down to 9 percent statewide and expected to keep falling, though at a sluggish rate, and is nowhere near pre-recession levels. Finally, the median price for single-family homes for sale (excluding new foreclosures) is up to $130,000.
Any movement upward is progress, of course, but Phoenix is still a very tough market. Lee McPheters, recently spoke on behalf of the W.P. Carey School of Business at Arizona State University and offeredthe following forecast:
Although the Arizona recovery is tepid at best, every key indicator is expected to improve in 2012 as compared to 2011, including jobs, incomes, sales and even housing… Still, no indicator will be sharply better until the national economy moves onto a faster growth path... On the positive side, the number of units going into foreclosure is declining, and housing prices appear to have stabilized… Depending on population growth, job growth and other factors, we could see full housing recovery in three to four years.
Three to four years is a very long time for those who wish to or need to sell their home for a good value, but as inventory falls (especially distressed inventory), we can hope that prices will break out of hibernation and start gaining speed in the spring. They may not shoot up as quickly as in springs past, but any growth is truly better than none.
Data from ZipRealty
As the foreclosure process undergoes changes, we may see a few more ups and downs in the amount of distressed listings on the market and perhaps more waves of REOs hitting the market. But all in all, things seem to be turning around on a national level as well as in Arizona. Even if it takes a few years, we hope to see Phoenix rise again.
Sources: HousingWire, WSJ, Inman, ASU, ZipRealty data