A 10-year look at the Phoenix Real Estate market - Foreclosures Impact

Phoenix Foreclosures

I usually break down the Phoenix Foreclosure market on a micro level. But, and as Monty Python used to say, "and now for something entirely different," here's a look at the larger macro picture.

I was curious just how far prices dropped since the boom years. So I went tothe multiple listing service, came up with some criteria, clicked a few buttons, and wallah: a 10-year look at the average price and price per square foot in the Phoenix real estate market. As you can guess, they have been impacted by metro Phoenix foreclosures. This is my disclaimer: this information came directly from the Arizona Regional MLS. Any realtor and can get the same information. I'm not responsible for any errorsss in the data. OK, now that that's over with, let's get back to this post.

Read that chart in this manner: in 2009 there were 92,146 residential sales in the Phoenix area. That total sales volume equaled $15,668,606,573, or an average price of $170,045. Since the average sold home was 1,930 square feet, the average price per square foot in the Phoenix housing market for 2009 was $88.00

Phoenix Foreclosures

Anyone who follows Phoenix real estate will realize the rest of the chart isn't hot breaking news because this information was available on an intuitive basis. In other words, we all knew that house values started an amazing increase in 2004 - 2005 and that many people bathed in the "afterglow" during 2006. But seeing these numbers all in one place -- and in black and white and blue-- is a minorshock to the system. Who doesn't wish they has access to this chart 4-years ago? However, then the crisis with foreclosures hit Phoenixand home values decreased to their current state.

You can see a $94.00 drop in the price per square foot from 2006 to 2009. Obviously, that is due to the fact that approximately 55% of all homes sold in 2008 - 2009 were Phoenix foreclosures. More specifically,bank owned homes and short sales. That quantity of metro Phoenix foreclosures is enough to suck the life out of values in any housing market (and we won't name other housing markets in this post -- you know which ones I'm talking about ).

When people ask me "is this the time to buy real estate" I can now honestly say prices are lower than they have been in the last 10 years.

Phoenix Foreclosures

Housing Tracker Phoenix

Phoenix foreclosures - December 2009

December 2009 Housing - Phoenix Foreclosures

Here is another in a series of reports for Phoenix Foreclosures. Results for December 2009 indicated an increase in the number of homes that sold for under $100,000. December 2009 is the first month in which there was any significant increase in this statistical category.

Looking at the total number of homes that sold for under $100,000 is one way to look at Metro Phoenix Foreclosure sales. Market information is revealed in the following chart and is read in this manner: "There were 7,670 homes sold in metropolitan Phoenix during the month of December 2009. 2,811 (or 36.6%) of all these sales were under $100,000. 2,249 of those homes (80% of the total) were Metro Phoenix foreclosure sales."I define Phoenix foreclosures as both bank owned homes and short sales.

As indicated by the color yellow, this number had been on a decline since a peak of 3,866 homes in May 2009. At that time 90% of all homes that sold for under $100,000 were foreclosure-type sales in the Phoenix area(indicated in orange).

A primary reason for the June through November decline has been the gradual increase of home prices in the Phoenix area. Our Phoenix market tracker has indicated the increase began in April 2009 when the average price in the entire metropolitan area was approximately $84.00 per square foot. Price per square foot in December 2009 was approximately $91.00.

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Phoenix housing market

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Phoenix real estate dominated by Phoenix foreclosures

Record Setting December 2009 Fueled by Phoenix Foreclosures

Yes, it's true. December saw7,670 residential sales in metro Phoenix. Foreclosures dominated those sales numbers, though the sales total wasn'tquite the all-time high. December 2004 was the only month in this last decade that had higher sales, and that was by less than 200 homes. Is that an amazing feat for Phoenix,foreclosures sales included? Definitely, considering that December is historically one of the lower sales months in the entire year as people turn towards holiday shopping and parties. It's also an impressive feat considering all of that doom and gloom reporting on the national (and local) economy seen in the Az Republic newspaper, Phoenix. Foreclosure sales made up 65.6% of December 2009 sales.

Take a look at these numbers from the Arizona Regional MLS. Sales include metro Phoenix foreclosures and normal sales.

MONTH - SALES
2009 - 7,670
2008 - 5,630
2007 - 3,347
2006 - 5,311
2005 - 6,527
2004 - 7,829
2003 - 6,311
2002 - 5,954
2001 - 4,531
2000 - 3,907

Additionally, 2009 recorded the third highest residential sales in the last decade. 2004 and 2005 (boom years) were the only two years with higher residential sales in the Phoenix real estate market. Phoenix foreclosures accounted for 69.7% of all sales in 2009.

33,014 more homes were sold in 2009 than in 2008, or a 55.7% increase!

YEAR - SALES
2009 - 92,292
2008 - 59,278
2007 - 54,231
2006 - 74,106
2005 - 104,133
2004 - 98,294
2002 - 68,411
2001 - 62,523
2000 - 55,400

There are currently 33,278 homes for sale in Metro Phoenix. Foreclosures account for 42% of all active listings. Sales are off to a pretty good start in January 2010 after a great December 2009.

Foreclosure homes in Arizona

Phoenix Foreclosures for Sale

Phoenix Foreclosures

Active Phoenix foreclosures exceeded 41% of all homes for sale to begin January 2010. This information is seen in the orange color on the first chart. I've defined Phoenix foreclosures as both bank owned property and real estate short sales, though;short sales are typically considered to be "pre-foreclosure." This is the first time since April 2009 the percentage has exceeded 40%, as the months of May through December 2009 averaged 38%.

The primary reason for the higher percentage is the increase in bank owned properties, as indicated in blue on the second chart. 5,380 bank owned Phoenix foreclosures mark the highest level since May 2009. Is this the beginning of more bank owned properties on the market? It does appear so, as the second chart indicates a four month increase. 2010 marks the year that many of the 5/1 adjustable rate mortgages will have rate increases and many interest only loans will revert to principle and interest loans. Expect Phoenix foreclosures to increase during 2010, but the effect will not be as devastating as was felt in 2007 and 2008 with the 3/1 ARMS. Having said that, the state of the economy in 2010 will probably have a greater effect than adjustable rate mortgages if unemployment continues on its current course.

Another statistic not shown by these charts is the number of days listings are currently on the market. The normal listings (not Phoenix foreclosures) on the market have been there for an average of 183 days. Phoenix foreclosures have been on the market for average of 106 days. The latter number would be smaller if not for the extended sale time of short sales.

The second chart indicates 5,380 bank owned properties (38.9% of all Phoenix foreclosures in red) and 8,445 short sales (61.1% of all Phoenix foreclosures in green). Watch for further increases in 2010 for both categories of Phoenix foreclosures.

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Phoenix Foreclosures Sales November 2009

The Phoenix foreclosures "sales %" dropped to a 12 month low in November 2009. 60.2% of all residential sales were foreclosure type sales. Phoenix foreclosures are defined as bank owned (REO, or real estate owned) properties and short sales.

That chart indicates that 7,586 residential properties were sold in the Phoenix real estate market in November 2009. 3,018 (or 39.8%) were normal sales while 4,568 (60.2%) were Phoenix foreclosures. The last time the percentage was near 60% was last December 2008. The peak in the sale of Phoenix foreclosures was 75.9% in March 2009. They have continued on a slow and consistent decline since that time.

Although the actual number of sales for Phoenix foreclosures follows the same basic trend as the %, the highest number of foreclosure sales was in May 2009. The number of foreclosure sales has decreased for two primary reasons: 1.) there are less foreclosures for sale and 2.) the price gap between normal sales and Phoenix foreclosures has shrunk, making normal sales more attractive than they have been in a long time.

Here's a look at how several cities in the Phoenix real estate market compared to the 60.2% average for all Phoenix foreclosures :

• Maricopa - 69.8%
• Glendale - 64.4%
• Phoenix - 63.6%
• Nov 09 - 60.2%
• Mesa - 59.7%
• Queen Creek - 57.8%
• Gilbert - 52.7%
• Chandler - 52.2%
• Scottsdale - 47.9%
• Tempe - 41.1%
• Ahwatukee - 39.5%

More Phoenix Foreclosures

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Phoenix Arizona Foreclosures - December 2009

Active Phoenix Arizona foreclosures increased to begin December 2009. Foreclosures are defined as both bank owned properties and real estate short sales. The increase was 803 properties in the Phoenix real estate market from November 2009.

The increase has been mounting since July 2009 when the total foreclosure-type properties were 11,868. You can also see by the chart that July 2009 had one of the lowest totals of Phoenix Arizona foreclosures in the last 18 months. The total increase in foreclosures since July has been 1,474 (seen in yellow). However, the percentage of foreclosures in the Phoenix, Arizona area compared to total listings has remained at the 38% level over the last six months (seen in red).

The physical condition of many Phoenix Arizona foreclosures has been improving over the last six months. In many cases the banks have been more liberal in spending some money to improve the looks and functionality of their foreclosures.

You can also see by that chart is that the increase in Phoenix Arizona foreclosures has been similar to the increase in the total active listings. In other words, the increase in listings is due primarily to the increase in foreclosure listings - not any increase in "normal" listings.

The second chart illustrates a breakdown of foreclosures in the Phoenix Arizona real estate market. The breakdown is between bank owned properties, also known as REO property, and real estate short sales. Phoenix foreclosure listings totaled 13,342 to begin December 2009. 4,816, or 36.1% are bank owned properties. 8,526 are real estate short sales, or 63.9% of all Phoenix area of foreclosure listings.

Real estate short sales continued to gain popularity in the Phoenix, Arizona area. Click here to search Phoenix Arizona foreclosures.

Arizona Foreclosures | Phoenix | Scottsdale | Tempe | Mesa | Glendale

Phoenix Foreclosures Snapshot - November 2009

Phoenix foreclosures comprise 30.8% of all real estate listings in the metropolitan area. Foreclosure listings are comprised of REO property (bank owned) and short sales. REO property used to be the majority of active listings in the foreclosure arena. However, bank owned properties have been on a decline for most of 2009. They are being replaced by short sales because more distressed homeowners are seeing short sales as a better alternative to foreclosure. The chart indicates 12,539 foreclosure listings in the Phoenix real estate market to begin November 2009. Since there are 32,351 total listings in the Phoenix market (seen in my last post), foreclosure listings make up almost 39% of all listings in the area. Of that 39%, 35.2% (4,417) are REO listings and 64.8% (8,122) are short sales. There are several reasons for the decline in REO property listings over the last year:

• the federally mandated foreclosure moratorium
• banks for selling more properties in bulk to large-scale investors
• banks are taking chunks of foreclosure properties and turning them into rentals
• more properties are being sold at public-type auctions

Homeowners are increasingly seeing short sales as a viable alternative to foreclosure. Although the short sale process can take between three and five months to complete, buyers in the Phoenix area real estate market are paying much more attention to short sales. The percentage of completed short sale transactions continues to grow each month in the Phoenix area.

Days on Market for Phoenix Foreclosures

Foreclosure listings have been on the market for an average of 80 days less than their counterparts -- "normal" listings -- during 2009. The second chart indicates that current foreclosure-type listings have been on the market for 105 days, while normal listings have been on the market for 182 days. The obvious reason is the difference in price between two categories of listings. REO property and short sales are always priced much lower than normal sales making them much more attractive to home buyers.

It can also be seen by the chart that overall days on the market has been steadily trending downwards for Phoenix area foreclosures. However, if we were to isolate REO properties we would find that the average sold home would be on the market for less than 60 days. The longer selling cycle for short sales is what keeps the foreclosure "days on the market" higher. Short sale your home