Recent reports say foreclosures are declining in metro PHOENIX and large numbers of homes are selling.
But, yet many homeowners feel trapped in houses they can't sell.At TEAM ADVANTA REAL ESTATE, we’re seeing this same phenomona.
Some real estate agents tell me that they can't find enough new listings to keep up with demand from buyers. Team Advanta is in this camp,- we need more listings to show our buyers.But, other agents that I know say there aren't enough buyers, and homes are selling too slowly.
The metro PHOENIX REAL ESTATE market may never have been as confusing as it is today.Nearly five years after the beginning of the housing crash, the region's market has fractured into countless different niches.
Each niche is defined by who's selling, what kind of home is for sale and where the home is located.
And each niche has become a market of its own.
Some - such as the market for small central PHOENIX FORECLOSURE HOMES being sold at auction - are booming, with prices rising and a huge demand from buyers.
Others - for example, traditional resales of newer large family homes in some neighborhoods in the far west or southeast Valley - have ground to a halt, where homes seemingly won't sell at any price.
Location is one traditional factor in a home's value that still holds true.But in this market, its effect can be extreme.A seller in one neighborhood might receive 10 offers, while the owner of a similar house 5 miles away won't receive any.The old mantra of Location, Location, Location still holds true.
In a splintered REAL ESTATE MARKET, once-reliable measurements just don't provide enough information for buyers or sellers.This is why you have to work with a REAL ESTATE AGENT that knows your specific market.
One reliable measure of REAL ESTATE activity was the number of homes for sale. Traditionally, 20,000 to 25,000 homes on the REAL ESTATE MARKET at any given time were considered normal.More than that meant an oversupply, and sellers might have trouble attracting buyers.Fewer meant a limited supply, a seller's market with rising prices.
As the HOUSING MARKET crashed, too many homes had been built.The region's inventory soared to more than 60,000 homes for sale in 2007, and prices plunged.
Today, according to the online REAL ESTATE publication the Cromford Report, metro PHOENIX REAL ESTATE listings are at 27,400 and falling - traditionally, a sure sign of rising demand and rising prices to follow.
But REAL ESTATE AGENTS and analysts see the same thing many homeowners feel.While some homes are selling easily, others simply won't.
PHOENIX’S HOUSING MARKET is a mixed bag now.There's a new normal for the market, and the norm is that there is no one rule that applies to PHOENIX REAL ESTATE market.
Who's selling
One factor that has a big effect on home sales is the nature of the seller.To understand, consider just how much things have changed in the past decade.In June 2001, there were about 10,000 home sales, according to the Information Market, a PHOENIX firm that analyzes real-estate data.Of that total:
- 7,300 were regular resales between a homeowner and a buyer.
- 2,700 were new-home purchases.
- 82 houses sold at FORECLOSURE AUCTIONS.
- One home was sold by FANNIE MAE, the federal mortgage giant that backs lenders and takes over those homes when borrowers default.
Ten years later, during June 2011, there were just over 11,000 home sales in metro PHOENIX.But the variety of sales was far wider:
- 3,684 were regular resales between a homeowner and a buyer.
- 540 were new-home purchases.
- 1,350 homes sold at foreclosure auctions on the Maricopa County courthouse steps.
- 1,255 houses were sold by lenders that foreclosed on them.
- 2,183 houses were sold by Fannie Mae and Freddie Mac.
- 1,822 homes were sold in short sales, in which lenders agree to let a homeowner sell for less than what is owed on the loan.
- 401 homes were sold by the federal departments of Veterans Affairs and Housing and Urban Development.
Because all of these kinds of home sales work in different ways, the market overall becomes more
complicated.
Different categories
The different splinters in the market have each begun to work in their own ways, REAL ESTATE MARKET watchers say.Some parts see a lot of sales but low prices; others, the opposite.
- Traditional resales: Fewer of these happen because of competition from cheaper FORECLOSURES and SHORT SALES. The ones that sell best are in popular neighborhoods with good schools, near freeways and shopping centers. But the percentage of FORECLOSURE HOMES listed for sale in metro PHOENIX has dropped by 5 percent in the past year, so regular sellers have less competition and might soon find it easier to sell.
- New-home sales: Homebuilding has slowed to a crawl in metro PHOENIX as the market continues to sell the many houses built on speculation during the boom years. Even with low land prices, it's still hard for homebuilders to compete with the prices of FORECLOSURE HOMES that were built less than five years ago.
- FORECLOSURE HOMES: These have become very popular, and a large volume of homes sell at metro PHOENIX trustee auction each month.But homes sell at auction for lower prices, and that makes the market's overall average sales price lower.
- Fannie Mae and Freddie Mac: Homes owned by these entities now dominate the metro area's market. - Short sales: This type of sale was rare a decade ago. Banks were reluctant to agree to them in the early part of the crash, but they have now become common. Because they're not a FORECLOSURE sale, but also are not a traditional sale, the value of a SHORT SALE transaction skews the overall REAL ESTATE MARKET in ways that are hard to measure.
The bottom line: Today's REAL ESTATE MARKET is complicated and can't be summed up as simply as in years past.
"Everyone is trying to figure out the PHOENIX REAL ESTATE market now, but there's no one set of data that truly tells the story.All the regular models for tracking the market are broken now," said Tom Ruff of the Information Market. "There is not just one market in metro Phoenix anymore."
The effects
That confusion makes it especially hard for HOMEOWNERS and HOMESELLERS to know what their houses are worth.
Traditionally, a home's value could be estimated from its "comps," comparable sales of nearby SOLD HOMES. Those offered an idea of the going price in a neighborhood and the price per square foot.Today, a regular HOME sells for $112 a square foot. A HOME sold through SHORT SALE goes for an average of $72 a square foot. A BANK OWNED, Freddie Mac or Fannie Mae home sells for $61.50 a square foot. And FORECLOSURE HOMES selling at auction are averaging $57 a square foot.
Comps for properties can be inconsistent and confusing at times.You can’t just look at the $/sq ft anymore because the REAL ESTATE MARKET is so fractured.
Measures of the overall market are harder to trust, too. Currently, metro PHOENIX’S REAL ESTATE MARKET overall median sales price is $124,000. But because many of the HOMES sold are FORECLOSURE AUCTIONS - in which low-priced homes are common - that number could be seen as low.Other homes may be worth far more.But few of those homes are selling, so they're not represented in the median price.
"Home sales activity is still very concentrated at the bottom end of the market," said housing analyst Mike Orr, who publishes the Cromford Report.
What's selling now
Homes in central PHOENIX area priced under $100,000 are moving like gangbusters with very few homes remaining on the market for long.I believe this is because of the location to jobs and public transportation and because the low prices mean investors get a reasonable return, in the form of rent, on their cash investment.
Market watchers also say three- to four-bedroom homes in suburban neighborhoods with good schools are also selling fast to both regular homeowners and investors who want to rent them out, often to families who have lost similar homes to foreclosure.
The region's less-expensive neighborhoods experienced the crash first, and now high-end housing areas are feeling more pain because there are fewer buyers who can afford those houses.
Sales of homes in the multi million-dollar range have definitely slowed. He said there are cash buyers looking for deals in PARADISE VALLEY and north SCOTTSDALE, but those deals bring prices down.
But there are still homes in PARADISE VALLEY and other high-end neighborhoods selling for prices just 20 percent lower than they sold during the market's peak.Other neighborhoods are also beginning to see homes sell for pre-boom prices from 2003-04,despite the fact the metro area's median home price is back to 1999's level.
The one indicator that can still count on is location.REAL ESTATE in the right areas will continue to sell for the highest prices.
As always, call us with any questions. We’re here to answer any questions you may have about REAL ESTATE.We live REAL ESTATE and like to think we have a good pulse on the market.
Sincerely,
DEEPAK VERMA
TEAM ADVANTA REAL ESTATE
(602) 295-0810
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