From LegalNewsline.com:

Arizona Attorney General Terry Goddard is suing multiple real estate agencies and professionals over alleged home foreclosure fraud.

Goddard filed the suit against 13 real estate entities, targeting an alleged three-part multi-million dollar real estate fraud scheme.

The complaint states that the defendants deceived under-qualified investors into buying homes and then sold the properties to rent-to-own buyers.

Among the accused are a real estate agent, a real estate broker and several loan officers.

According to an AZBiz.com article the broker, Vince Volpe of RE/Max All Executives, says he wasn’t involved and is cooperating with the AG’s office. The accused agent, Andrew Silverstein, is not longer at Volpe’s office.

Therein lies one of the risks of being a real estate broker. You are liable if someone in your brokerage does something stupid, a category that clearly fraud falls under.

Here’s something I struggle with:

Under the investments scheme, Goddard said, the defendants deceived more than 130 investors into buying multiple investment homes under a "worry free" guarantee requiring little or no startup capital. However, once the down payment was made, the investors stopped receiving rental payments. (my emphasis)

There is no “worry free” investment. Ever. Period. I suppose Treasury Bills are about as worry free as they come, they are backed by the U.S. government after all. So unless it fails…. well, so maybe nothing is truly worry free.

In all seriousness, if some investment group promises you untold riches, or makes claims of guaranteed success or proclaims some fool-proof process, don’t walk away.

Run.

From the “Ask the Broker” inbox comes an email from Darrell in Alberta, Canada:

I’m a Canadian looking to get into the Foreclosure market in your area. What’s the best way for me to approach this and where can I find the best information on the process and the pitfalls of these transactions?

Great question Darrell!

<< Fair warning – interminably long post ahead >>

I’m assuming here (and I really hate to assume anything) that the question is asking about homes that have already been foreclosed on — that being taken back by the lender and placed on the open market for sale. If you are wanting information on buying homes at foreclosure auctions, then that’s a post for another day. The quick fact is, the vast majority of homes at foreclosure auctions (more accurately in Arizona — a Trustee Sale) are not bought and they wind up reverting to the bank. Why? The bank wants too much at the auction. They’re attempting to recoup all their losses.

Here’s a couple of points regarding the Phoenix foreclosure market (as defined above) that you want to be aware of.

First, there are a lot of bank owned homes on the market. Keep in mind that “bank owned” = “Foreclosed” = “REO” (Real Estate Owned).

How many is a lot?

Hard to say. At this moment in time, there are 10,770 single-family home listings 9,509 in the immediate Phoenix metro area) and 1,106 condo/town homes in the MLS^[1] flagged as “Lender Owned Property”. Likely there are some properties out there that are either: 1) not really lender owned but are flagged as such; or 2) are lender owned but not flagged as such. After all, the data in the MLS is only as good as what is entered.

Suffice it to say, there are many, many lender owned homes to chose from.

Second, be advised that many of these homes are not in good condition. It’s not unusual for foreclosed homes to be missing such functional items as cabinets, toilets, stoves and light fixtures. Sadly, when faced with foreclosure, many people take everything they can from the home in a last ditch effort to “get something” from their home purchase. I’ve seen foreclosures where the owners ripped out all the wiring. Others were trashed to the point where college frat house residents would be ashamed.

Contrary to somewhat popular belief, not all bank owned homes are trashed. There are many that are in pristine condition (and all points in between). You just have to either shop carefully, or be prepared with money, time and desire to address any deficiencies.

What is the best way to search for foreclosures in Phoenix?

Why right here! You can use our home search and select “Bank / lender owned” from the Foreclosures drop down. Or, if you prefer, just go straight to this page that is dedicated to searching for Phoenix foreclosed homes.

We don’t require any registration for any of our home search tools. If you want to save searches or get automatic updates of new listings via email, then we do require very minimal information. But you will never be hassled with follow up emails/calls. If you need anything, ever, just ask.

But wait! What about BUYING foreclosures?

The process of actually buying a foreclosed home is basically identical to buying any other home owned by an individual. The contracts are the same, the disclosures and time periods are all the same (though you’ll almost never get a sellers property disclosure statement from a lender owned home). Also be advised that some lenders will have additional addendums for the seller to sign.

That said, it is important to know that you should use a buyers agent that is familiar with the REO^[2] paperwork and process. It can greatly help your chances of having your offer accepted if your agent knows how to handle REO paperwork. I’d tell you which Phoenix agent to choose, but you already know… .

The lender, who is in effect the seller, will want the same assurances as any other seller that you can secure financing. Like any other seller, they will want to know you’re serious and committed to purchasing the home you place an offer on.

For Canadian home buyers of US property, securing financing can be challenging. Thanks to the credit crunch, some lenders no longer service loans for foreign nationals. But some still do. They typically require 25 – 30% down. Other requirements vary from lender to lender. Given the recent volatility of the Canadian / US dollar exchange rate, it makes sense to at least investigate a foreign currency broker — they can save you a bundle.

The Phoenix Foreclosure Market

We’ve already discussed the bloated inventory of foreclosure homes on the market in Phoenix. So how does this impact the foreclosure market?

Bank owned homes in Phoenix tend to be aggressively priced. Lenders aren’t in the business of holding homes. They want them sold. (Which is why the tortuous process of short sales^[3]  is dumb-founding.) So don’t expect to get an offer that is pennies on the dollar accepted. In fact, it’s not uncommon for foreclosed homes to receive multiple offers at or even above list price.

Bank owned homes can often move very quickly. While it is disappointing to get over-bid on a home you really like, keep in mind the 10,000 plus foreclosures on the market and more coming on every day. The odds are overwhelming you can find another home to go after.

The Lowdown – Advantages and Disadvantages of Buying Foreclosures

To wrap this up (finally!) here are a couple of lists. . .

Advantages of Buying Foreclosures:

• Aggressively priced.
• The owner (the bank) really wants them sold.
• Lots to chose from.
• Banks are relatively swift in making an offer decision — often as quickly as a few days (in stark contrast to the weeks on end a short sale decision can take).
• You will have an inspection period (typically 10 days) after contract acceptance to have the home inspected. Cancellation in this period is not difficult.
• The bank is not emotionally attached to the home. This can make negotiations swifter — though there is typically little if any room in price negotiations.

Disadvantages of Buying Foreclosures:

• Condition may be an issue.
• Typically sold “as is” — meaning the bank will not do any repairs (though sometimes they will).
• Buyer competition — may be in a multiple bid situation.^[4]
• Update: Financing Concerns. Sean Terry of the fabulous Deal Makers Blog made a great point in Comment #1 below about potential financing concerns regarding property in poor condition. Be sure to read it!

Hopefully this tome answers some of Darrell’s (and others) questions. I could ramble on forever about this and still miss something. Should anyone have any questions, drop a comment here or contact me!

As always, anyone reading who has anything to add is welcome and encouraged to do so!

1. Multiple Listing Service — a database where the vast majority of homes for sale are entered
2. Real Estate Owned — the less nasty sounding term for foreclosed / bank owned homed
3. A short sale is when a home is sold on the open market for less than what is owed on it.
4. Multiple Bid — where more than one potential buyer submits an offer on a home

It was no easy summer for home sales. May was the worst May in three years. June was the worst June in six years. July was the worst July in seven years. And now August is checking in as the worst August in four years…

Worst worst worst worst. Using that word four times in the first five sentences of the article could certainly lead one to believe that the entire Phoenix real estate market is imploding. Do a quick Google on “real estate bubble” and you’re presented with 14.3 million results in 0.22 seconds (how DO they do that?).

Don’t get me wrong, it’s not necessarily a bad article. In fact, it’s chocked full of rather interesting data. Our fellow blogrollee, John Wake is quoted. (John’s a virtual treasure trove of Phoenix area real estate stats.)

What drives me batty is how the media insists on portraying the market as all doom and gloom. As in more nuggets from today’s article:

While the number of existing home sales increased slightly in August compared with July, it was still down considerably from August 2005.

Through August of this year, there were 47,515 sales, a nearly 40 percent decrease from the same time period in last year’s record run-up.

Note to self and readers: LAST YEAR’S RECORD RUN-UP. Comparing today’s market to the insanity of last year simply isn’t fair. As we said here long ago, last years sales and appreciation rates COULD NOT be sustained.

But wait, there’s more. Here’s my favorite!

. . .2006 will likely end up more like 2002, the last year before the market started its hyper upward climb, Butler said. (as in Jay Butler, Director of the Arizona Real Estate Center at ASU)

So check me if I’m wrong Sparky, but Mr. Butler is clearly saying that 2006 will be a normal year. Look at that closely again… 2006 will likely end up more like 2002 — the last year before the market started its hyper upward climb. Let’s face it folks, we have decidedly NOT been in a normal market the past couple of years in Phoenix. 50% annual appreciation rates are not normal. The insanity has subsided (because it had to) and we are returning to a normal market. It hasn’t imploded, the bubble has not burst, the SKY IS NOT FALLING.

Jay Butler is an oft quoted real estate economist. Of course oft-quoted doesn’t always mean he’s correct. Greg at the Bloodhound blog just down the road once asked Mr. Butler a question I’ve long pondered. (Did he ever take you up on that free meal offer Greg?)

In this case though, I think Jay Butler’s probably correct. After all, gathering sales numbers and comparing them to historical data isn’t exactly rocket science.

The frightening part of the media’s obsession with Chicken Little is that we ARE going into the slow part of the season. Sales WILL be down (they always are). I’m betting that little fact will be brushed under the rug or buried in the bottom of all the articles we’ll see in the next 3 – 4 months.

I can hardly wait.

.

UPDATE: Please see this post for an updated chart (through August 2008) plus new charts!

“We’ve got to refinance NOW, rates are going up!”

“If we don’t buy now, we may not be able to get a good rate!”

I hear comments like this all the time.

Chasing mortgage rates will drive you bonkers. Yes, the rates for 30 year fixed rate mortgages are inching up. But keep this in mind… they are coming up from historical lows. Today’s rates are some of the lowest ever. If you concern yourself too much about locking into the lowest rate you’ll ever see in your lifetime, then you’ll never get anything done.The chart below shows the rate of a 30 year fixed mortgage since 1971. Note where we are today compared to the other 35 years this chart reflects.

Is now a good time to convert that ARM to a fixed rate mortgage? Maybe. Maybe not. Rate isn’t the only factor to consider in a refi. How long you plan to live in your home, closing costs, your personal and professional situation, all this and more should be considered. Consult a loan officer, CPA and real estate professional in order to consider ALL your options. Rates are important, but they aren’t everything.

Homes (Data includes Single Family Homes, condo/Townhomes, 2 – 4plex, mobile/mfg and timeshares):

As of August 5, 2006 at 5:51pm:

Current Active Listings: 46,346 (39,086 SFH’s)
Active With Contingencies (AWC): 923 (what does AWC mean?)
Pending: 6,348
Sold (July 1, 2006 – July 31, 2006): 6,103
Sold (June 1, 2006 – June 30, 2006): 7,212

Land:
Active: 9,930
AWC: 45
Pending: 377
Sold (July 1 – July 31): 327

Most expensive current listing: $15,000,000. Nine bedroom, 13 baths, 18,000 square feet in Paradise Valley.

Number of homes listed over $1,000,000 = 2,316
Number of homes listed over $10,000,000 = 12

For more Phoenix Home Sales stats visit the Statistics Page at http://www.ThompsonsRealty.com

Data is extracted from the Arizona Regional MLS (ARMLS) and compiled by yours truly

Jay’s Opine: Sorry, I haven’t had time to really disect this latest one from the Republic. I see it’s actually time-stamped as being released 26 minutes from now, which seems kinda odd… So here at The Phoenix Real Estate Guy you can actually get some news stories before they are even written. I’ve been trying to tell you people how amazing this blog is!

Last year we sold home houses to investors site unseen, much like the article mentions. Investors are a big reason there are now over 46,000 homes in the MLS, as opposed to 4,000 in January 2005. More on that later (and July stats are coming SOON, I promise!). I’ve just been insanely busy lately. I apologize to those avid readers who come here to find something new. I’ve neglected you lately.

So here’s a tidbit from the Republic. Not my favorite paper, by a LONG shot. But at least they are good for the occasional gem like, “Buyers need to do their homework before entering into a contract for a new house. ” Well duh. I believe 90% of the population has enough sense to know that. OK, 70%. Regardless of the dumbing down of a lot of the Republic’s articles, they do at least offer some local insight…

The law of gravity trumps speculation
(article link)
Aug. 2, 2006 12:00 AM

News flash: The law of gravity wasn’t suspended in the Valley. In last year’s sizzling real estate market, home prices and sales kept going up.

And up. And up.

At least one of four sales was to a speculator. Prices skyrocketed 55 percent in 2005. Sellers raked in profits as bidding wars drove up prices.

And now, an astonishing number of people are startled to find that the law of gravity still applies to the Phoenix area.

They’re stunned that prices are leveling off. Amazed that houses take nine weeks to sell instead of flying off the market in three. (Jay adds: actually in the height of the boom, houses were flying off the market in three hours, not three weeks. And MANY take more than nine weeks to sell now, largely due to over-pricing. There ARE buyers out there….)

For some, the market came down with a loud bang.

Those who treated the Valley’s housing market like a casino, buying homes sight unseen and expecting to cash in a big winner every time, deserve no pity if their gamble isn’t paying off.

Average buyers who got caught in the middle – rushing to trade up to a more expensive house and now unable to sell their old home for enough to swing the deal – are a more sympathetic case. But some of them, too, have been caught up in a risky round of flipping property, letting greed overcome good sense.

Good sense was also missing among homeowners who rushed to tap equity and will owe more than their houses are worth if prices decline.

The truly sad tales are home buyers left in the lurch by construction companies that stop projects in midstream because of rising costs, cash flow or other problems. Turner-Dunn Construction Inc. abruptly halted work on some 200 houses in Casa Grande and Maricopa.

It may be a cold comfort for buyers left holding the bag, but at least the state Department of Real Estate and the Registrar of Contractors are investigating Turner-Dunn.

And Arizona, unlike some states, has a recovery fund in case customers are stiffed by licensed contractors. But there are a lot of hoops, including getting a legal judgment, and payouts are capped at $30,000, with a $200,000 limit per contractor. A lot of Turner-Dunn home buyers stand to lose thousands in earnest money or pay out big bucks to get other companies to complete the construction job.

The boom-bust cycle is so much a part of the Arizona landscape – and real-estate history has repeated itself so often – that it’s unlikely any lessons will sink in.

But here are a few things we should learn:

• The definition of a good market depends on your point of view. The run-up in prices last year, which pushed the median home past the quarter-million-dollar mark, was great for people in the real estate business and buyers who could cash in.

But it jacked up the price of housing in a place where affordable rents and mortgages used to offset relatively low wages.

Two years ago, the typical metro Valley household had more than enough income, 114 percent, to buy the average existing house. Now, that household earns just 84 percent of the amount needed for an average home. (Jay adds, I wish these reporters would cite their sources. I believe this one, I’d just like to know the source)

• Buyers need to do their homework before entering into a contract for a new house. That includes looking into a company’s track record with the Registrar of Contractors, the Better Business Bureau and other projects, as well as carefully reading the public statement. The down payment should be paid out in several installments as work progresses. But it’s hard not to be swept away when the market is so hot that builders hold lotteries for their next phase. And a relatively new company may be hard to check out.

• The Valley is tied into worldwide trends. (wow, how profound!) The innate value of our housing market wasn’t driving prices here. Favorable interest rates, low returns on other investments and demographic changes have fed a wave of speculation in places like Dublin, London and Singapore, according to Jay Butler, director of the Arizona Real Estate Center at Arizona State University.

• The next time around won’t be different. (Jay adds–THAT is indeed a fact!)

Jay’s Opine: Home sales data for June was just released, and of course the media is all over it, proclaiming doom and gloom for the entire Phoenix market. Sales are definitely down, to 2000 levels, and that gets the majority of press. What doesn’t get nearly as much focus is yet another record has been set for median home value. The market can’t be imploding as the media would like you to believe if prices continue to rise (generally speaking). Yes, the RATE of rise has slowed, but as blogged here a long time ago, the appreciation rates we experienced in the past CAN’T continue .

June resale home sales fall to near 2000 levels
The Business Journal of Phoenix – 1:32 PM MST Wednesday
by The Business Journal

Another sign of the weakness in the local resale housing market, with June sales dipping to a six-year low.

The Arizona Real Estate Center reported Wednesday 5,460 recorded sales for June. This is the weakest amount since June 2000, when 5,020 sales were recorded.

June’s activity is down from the 6,870 sales recorded in May.

So far this year, there have been a total of 36,290 sales, while year-to-date sales stood at 58,030 at the same point in 2005.

However, Arizona Real Estate Center Director Jay Butler noted that the current level of activity is very comparable to year-to-date recorded sales in 2003, at 34,880 sales and 2004 year-to-date, 48,220 sales.

The primary news of last year’s housing market was the rapid rise in the median home price from $194,000 in January to $260,000 in December.

Although the median resale price in June set a new record at $267,000 compared to $249,900 for a year ago, the growth rate has been disappearing, with the median price being up slightly in May at $265,000, and $264,900 in April.

For June 2006, 14 percent of all recorded sales were for homes priced from $125,000 to $199,999, 44 percent for $200,000 to $299,999 and 39 percent for homes priced at more than $300,000.

Here is the city-by-city breakdown for June 2006 resales and prices, compared with June 2005:

* Phoenix resales dropped by 1,325 sales over the year to 1,725, as the median sales price held at $225,000 over the month, yet rose from $190,215 in June 2005.
* Scottsdale’s resale home market declined from 920 recorded sales a year ago to 465, however the median sales price jumped from $559,000 a year ago to $640,000.
* The Mesa resale housing market fell by 755 sales to 585, while the median price increased from $220,000 to $247,600.
* Glendale decreased from 880 to 430 sales, but the median sales price increased from $220,000 to $253,000.
* Peoria’s resale market fell from 560 sales to 250 sales, while the median price moved from $255,000 to $272,900.
* The Sun City resale market fell from 200 to 75 sales, as the median sales price increased to $215,000 from $186,200. Resale activity in Sun City West also fell from 90 to 45 sales, but the median sales price increased from $235,000 to $258,950.
* Gilbert’s resale count fell from 795 to 330 sales, but the median sales price increased from $291,500 to $330,000.
* Chandler’s resale market slowed from 760 recorded sales for a year ago to 380, while the median sales price increased from $275,000 to $295,000.
* The resale market in Tempe dropped from 270 to 160 sales, with the median sales price increasing to $298,500 from $245,000 a year ago.
* Avondale’s resale market fell from 265 to 120 sales with the median price moving from $238,000 to $259,050.
* El Mirage sales dropped by 100 to 85 sales, while the median home price went from $196,000 to $215,000.
* Goodyear declined from 215 to 90 sales, while the median price increased from $262,000 to $290,000.
* The Surprise resale market decreased from 535 recorded sales a year ago to 175 sales and the median sales price rose by $14,900 to $254,900 The Arizona Real Estate Center is associated with the Morrison School of Management and Agribusiness at Arizona State University’s Polytechnic campus. The center collects and analyzes data concerning real estate in the greater Phoenix metropolitan area.

More stories from the media. Note the negativity in the headlines…
http://kvoa.com/Global/story.asp?S=5144394&nav=HMO6
http://www.azcentral.com/arizonarepublic/news/articles/0713resale0713.html

Jay’s Opine: Says a fellow Realtor in the Republic article, “I’m not saying we are out of the woods yet,” he said. “There is so much property on the market that it is a very strong buyers market. It has done a 180 turn to what it was a year ago.” Sigh…. yes, the market is totally different than last year. But sorry folks, we are NOT in a “very strong buyers market”. There’s about six months of inventory on the market right now. By almost all experts definition, that is a NEUTRAL market. It FEELS like a “strong buyers market” because it has CHANGED so much from a insanely strong seller’s market.

Jay’s Opine: Really not all that surprising. Do you think the value of your home increases as the structure ages and deteriorates? Generally speaking, older homes are in more need of repair, have higher maintenance costs, and aren’t as energy efficient as newer homes. Yet home values tend to increase over time…. Hmmm. Is it the actual structure that increases in value, or is it the LAND the structure is sitting on that increases in value? It’s all (well mostly) about the land…

Land Prices Increasingly Drive Housing Markets, Fed Study Says
By Campion Walsh
From The Wall Street Journal Online (June 22. Article Link)

WASHINGTON — Housing prices in big U.S. cities have increasingly reflected underlying land value rather than building value since the mid-1980s, and that trend is likely to continue, according to a Federal Reserve study released Tuesday.

In the 46 biggest metro housing markets, land’s share of property prices increased on average to 51% in 2004 from 32% in 1984, according to the study authored by Michael Palumbo, chief economist in the Fed’s flow of funds section, and Morris Davis, a former Fed economist now at the University of Wisconsin.

The increase was especially sharp during the 1998-2004 housing boom, when land’s share of property values gained 11 percentage points, the study said.

“With residential land having appreciated so significantly over the past 20 years around the country, the future course of land prices is expected to play an even more important role in governing home prices — in terms of average appreciation rates and volatility — in the next two decades,” according to the study.

The report concludes that land’s increased share of property values “could mean faster home-price appreciation, on average, and possibly larger swings in home prices.”

Even if land appreciation returns to the slower pace seen before the 1998-2004 boom, cumulative gains in land value mean that house prices might rise more quickly on average than they did before the boom, it said.

Regionally, relatively expensive housing markets have seen somewhat bigger increases in land’s share of prices in the 1998-2004 period, but the current housing boom has been marked by rapid appreciation of residential land “just about everywhere,” according to the report.

The Fed study also found that at some point since 1984 most large U.S. cities have gone through one pronounced price cycle in which residential land lost value for several years, usually after several years of rapid appreciation.

“In real terms, land prices have generally taken several years to go from peak to trough, and the subsequent recovery from these price declines has generally occurred at a more gradual pace,” the study said.

And Jay adds: Land values in and around the Phoenix area have exploded in the last couple of years. We recently listed and sold several 5 acre parcels inan area northwest of Phoenix called Whispering Ranch. As recently as two years ago, these parcels were selling for $8,000. Today’s prices? $60,000 – $100,000. Don’t you wish you’d bought a dozen two years ago? Another real life Phoenix land story…. an Air Force Sargent calls and says, “I’m looking for a couple of acres in Queen Creek. I lived near there about 10 years ago and am moving back. Can you help me?” I thought this guy might not understand the BOOM Queen Creek has gone through in the last couple of years. I asked him roughly how much he wanted to spend. He said $4 – $5,000 tops. Then I had to break the news to him that two acres in Queen Creek would probably cost him over $200, 000…

Jay’s Opine: The article below is from ASU’s Arizona Real Estate Center. These guys know their stuff and report some great stats on the Arizona and Phoenix area markets.

The astute reader of this blog may note that the sales numbers they quote here don’t exactly match up with the ones I post in the MLS Listings & Sales Stats posts. That’s because I report data from MLS sales, and the ASU AzREC reports ALL closed sales. Hence it’s slightly more accurate, however it’s perfectly acceptable to look at MLS data for trends and analysis as well. Non-MLS sales would include sales between private parties, FSBO sales, and “exclusive listings” that aren’t in the MLS.

Arizona Real Estate Center Reports May 2006 Resale Home Market Activity

Article Link

Friday, June 9, 2006

MESA, Ariz. – Historically, resale housing activity in May triggers a series of good levels through August. May 2006 had 6,870 recorded sales, which is slightly below the highest level for 2006 at 7,265 sales in March. While May 2006 produced a good level of activity, it was well below the 10,425 sales of a year ago and the lowest level since May 2003 (5,890 recorded sales). So far in 2006, there have been a total of 30,830 sales, while it stood at 46,485 sales in 2005 year to date. While it is very unlikely that the market could have sustained the level of 2005, the current level of activity is very comparable to that recorded in the years of 2003 year to date (27,000 sales) and 2004 year to date (36,555 sales).

The primary news of the last year’s housing market was the rapid rise in the median home price from $194,000 in January to $260,000 in December. However, since the $263,000 median price was set in September 2005, the aggressive growth rate has been disappearing with the median being up slightly to $265,000 in May, while it was $264,900 in April 2006 and $235,000 for a year ago.

As the housing market slows, the entry-level sector basically disappears, while the move-up market garners a larger share of the remaining activity. Thus, it is not unusual to see median prices stabilize or even increase as the move-up market works to be satisfied. For May 2006, 14 percent of all recorded sales were for homes priced from $125,000 to $199,999, 44 percent for $200,000 to $299,999 and 39 percent for homes priced over $300,000.

Along with a higher median home price, mortgage interest rates are higher than a year ago. Thus, affordability continues to be an issue. The average 30-year mortgage for May 2005 was 5.5 percent, while it was 6.2 percent for May 2006. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home increased from $1,135 to $1,380. Since the greater Phoenix area is so large, the median price can range significantly from $700,000 ($663,750 in April) in North Scottsdale to $150,000 ($147,500 in April) in the Sky Harbor area of the city of Phoenix.

“When purchasing a home for investment or occupancy, the rapid growth in price that was so evident in much of 2005 is somewhat soothing to the uncertainty of the buying decision,” said Jay Q. Butler, director of the Arizona Real Estate Center at ASU’s Polytechnic campus. “If home prices continue to be stable or even decline in some areas, potential buyers may be increasingly reluctant to make the purchasing decision, because future appreciation is much more uncertain. Further, current owners, especially investors, may want to bring homes to a good market in order to lock any current appreciation.”

With interest rates, especially short-term ones, continuing to increase and stable home appreciation, there is increasing concern about the ability of some homeowners to maintain their homes. This may be especially evident for those that have used some of the more creative financing instruments, such as option payment plans and initially low interest rate adjustable mortgages.

Over the last few years, the townhouse/condominium market has had increased popularity for owner-occupancy, especially for young and minority households, and investors. Sales activity followed a pattern similar to the single family market, with an increase from 1,390 sales for April 2006 to 1,470 sales for May, which was below last year’s 2,055 sales. So far in 2006, there have been 7,090 sales, while there were 8,800 sales a year ago. Further, the median home price has remained unchanged from April at $175,000, while it was $143,500 for a year ago.

The median square footage for a single-family home recorded sold in May 2006 was 1,625 square feet, which is smaller than the 1,655 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,100 square feet, which is smaller than 1,135 square feet reported a year ago.

* In contrast to May 2005, recorded sales in the city of Phoenix decreased from 2,830 sales to 2,120 sales. The median sales price increased from $220,000 in April 2006 to $225,000, while it was $180,450 a year ago. Since Phoenix is a geographically large city, the median prices can range significantly such as $150,000 in the Sky Harbor area to $330,000 in the Union Hills area. The townhouse/condominium sector decreased from 625 to 465 sales, while the median price increased from $116,000 to $153,700.

* While the Scottsdale resale home market declined from 865 a year ago to 535 recorded sales, the median sales price continued its upward movement by increasing from $527,750 to $615,000, while it was $593,000 in April 2006. The median resale home price is $700,000 ($663,750 in April) in North Scottsdale and $329,250 ($320,000 in April) in South Scottsdale. The townhouse/condominium sector in Scottsdale also decreased from 445 to 305 sales, but the median sales price increased from $245,000 to $261,500.

* The Mesa resale housing market declined from 1,205 to 790 sales, while the median price increased from $213,000 to $249,950 ($245,900 in April). The townhouse/condominium sector also fell from 290 to 225 sales, while the median home price increased from $115,000 to $157,000.

* Glendale decreased from 800 to 575 sales, but the median sales price increased from $215,000 to $250,000 ($250,000 in April).The townhouse/condominium sector also declined from 95 to 80 sales, while the median sales price increased from $94,750 to $148,500.

* For the city of Peoria, the resale market fell from 445 sales to 305 sales, while the median price moved from $238,000 to $284,950 ($275,500 in April). The townhouse/condominium sector slowed from 60 to 50 sales and the median price went from $134,900 to $175,000.

* In comparison to a year ago, the Sun City resale market fell from 200 to 120 sales, the median sales price increased to $220,000 from $188,000. Resale activity in Sun City West also fell from 110 to 45 sales, but the median sales price increased from $222,000 to $259,000.The townhouse/condominium market in Sun City declined from 125 to 75 recorded sales, while the median home price increased from $120,000 to $149,000. In Sun City West, activity fell from 35 to 10 sales, but the median sales price increased from $165,000 to $172,950.

* The resale market in Gilbert decreased from 605 to 340 sales, but the median sales price increased from $285,000 to $327,450 ($339,000 in April). The townhouse/condominium market fell from 20 to 15 sales as the median sales price increased from $160,000 to $205,000.

* For the city of Chandler, the resale market slowed from 710 to 485 recorded sales, while the median sales price increased from $252,105 to $306,000 ($295,000 in April). The townhouse/condominium market declined from 80 to 50 sales and the median sales price increased from $135,250 to $186,500.

* The resale market in Tempe decreased from 275 to 210 sales, with the median sales price increasing to $288,500 ($275,000 in April) from $236,950 a year ago. The townhouse/condominium sector slowed from 140 to 100 sales and the median sales price increased from $150,000 to $198,000.

* The highest median sales price was in Paradise Valley at $2,058,500 with a median square foot house of 4,105 square feet.

* In the West Valley, the following communities represent 9 percent of the resale market, which is down from the 11 percent of a year ago.
o Avondale fell from 280 to 145 sales with the median price moving from $226,000 to $260,000 ($260,000 in April).
o El Mirage decreased from 165 to 95 sales, while the median home price went from $185,700 to $214,950 ($219,900 in April 2006).
o Goodyear declined from 210 to 125 sales, while the median price increased from $245,000 to $295,000 ($298,200 in April).
o Surprise decreased from 465 sales ($231,000) to 275 sales ($256,300), while it was $250,000 in April.

CONTACT(S): Jay Q. Butler, 480/727-1300, jay.butler@asu.edu
Christine Lambrakis, 480/727-1173, 602/316-5616, lambrakis@asu.edu

The Arizona Real Estate Center is associated with East College at Arizona State University’s Polytechnic campus. The center collects and analyzes data concerning real estate in the greater Phoenix metropolitan area. The center is a comprehensive and objective source of real estate information for private, public and governmental agencies. Its director, Dr. Jay Q. Butler, may be reached at (480) 727- 1300 or e-mail him at Jay.Butler@asu.edu.

U.S. home-price growth slows in first quarter
Higher mortgage rates cut into appreciation
Monday, June 05, 2006

Inman News

Freddie Mac today announced that its Conventional Mortgage Home Price Index increased by 8.7 percent on an annualized basis in the first quarter of 2006, down from a revised fourth-quarter-2005 rate of 12.9 percent and a third-quarter-2005 growth rate of 13.7 percent.

Nationally, home values increased 12.7 percent from the first quarter of 2005 through the first quarter of 2006, down from the 12.9 percent annual growth seen over the four quarters ended in March 2005.

“Home prices are starting to feel the effects of the upward trend in mortgage rates,” said Frank Nothaft, Freddie Mac vice president and chief economist. “That trend continued during the first quarter with 30-year fixed mortgage rates climbing from an average 6.15 percent in January to 6.32 percent in March, according to the Primary Mortgage Market Survey. Rates on adjustable-rate mortgages rose even faster, with the introductory rates on 1-year Treasury-indexed ARMs rising from an average of 5.16 percent at the start of the year to 5.51 percent by the end of March.

“We have seen a lot of mixed news with respect to the housing market in the past few months. Construction employment, which had been one of the reliable growth sectors, was relatively flat throughout the first quarter. But a gradual and orderly slowing of the housing market has been anticipated for some time now as we come off of record-high sales and single-family home construction. We anticipate about a 7 percent decline in home sales this year and a transition from a seller’s market to a buyer’s market.

The Pacific states posted the strongest home-value appreciation in the U.S., with quarterly appreciation of 13.3 percent at an annualized rate during the first quarter, followed by the South Atlantic region with gains of 12.7 percent. The Middle Atlantic region came next, with gains of 9.8 percent. The Mountain states experienced average price growth of 9 percent with the West South Central states after that with 8.6 percent growth. The East South Central division saw an increase of 5.7 percent while New England had gains of 5.2 percent. The East North Central states had the second slowest annual appreciation of 3 percent annually. Finally, the West North Central states came in last with a growth rate of only 2.5 percent.

“The Pacific region reclaimed its title of real estate leader, with Hawaii gaining the fastest at a 20.7 percent annualized growth rate for the first quarter,” said Amy Crews Cutts, Freddie Mac deputy chief economist. “Two states, Iowa and South Dakota, are showing negative growth for the quarter, but year-over-year they are still up more than 4 percent.

“We are starting to see significant signs of weakness in areas that have been hard hit by manufacturing job losses,” Crews Cutts said. “As a result of job losses three to five years ago we are seeing rising inventories of foreclosed properties in Michigan, Ohio and Indiana and other places, and while most indices are still up, the home-price growth rates in those areas are slowing markedly already. For example, in Detroit, home prices grew just 0.3 percent on an annualized basis in the first quarter and 1.9 percent over the last 12 months. But four smaller cities – Sandusky, Ohio; Anderson, Ind.; Muncie, Ind.; and Saginaw, Mich. – are already showing negative changes year-over-year.

“The first quarter of 2006 marks the third consecutive quarter of moderation in home-value growth. We are expecting about half of the increase that we saw in the national average home-value appreciation in 2005 for 2006, which puts annual home-price growth between 6 and 8 percent, depending on how fast interest rates rise over the remainder of the year. This would still be above the long-term average growth rate and reflects a still vibrant but normalizing housing market.”