By Catherine Reagor – The Arizona Republic
Frenzied home-sales activity in June proved earlier speculation about a third dip in metro-Phoenix home prices to be untrue.
The median price of an existing home in the region climbed to $118,950 last month, after hovering at a real-estate crash low of $115,000 for six straight months, according to the Information Market, a realty-data company.
The rate of home sales also rose, with a nearly record 9,450 used and new homes sold in Maricopa County in June, the largest monthly number since the end of housing boom in December 2006. And that number doesn’t include the more than 1,300 homes sold at foreclosure auctions by lenders.
The home-sales market has been dominated by foreclosure homes, but foreclosures also declined. The region had 2,000 fewer active foreclosure filings in June than May. At the same time, the number of homes for sale was down nearly 10 percent from May.
The combination means a decrease in inventory, as more foreclosure homes are resold and fewer homes come on to the market to replace them. That drop in supply helps trigger an uptick in prices.
Market indicators started to show signs of a recovery in March. The recent numbers are a further confirmation.
“Supply continues to drop while demand is extremely strong,” said real-estate analyst Mike Orr, who publishes the online daily “Cromford Report.”
He said there are still some market watchers who believe there is a large “shadow inventory” looming over Phoenix. These homes, which aren’t in foreclosure but could soon be taken back by lenders, could flood the market and drive prices down again. But his figures show Phoenix’s shadow inventory has been steadily falling since November 2010 and won’t impact prices.
Who’s buying in Valley
Most of the buyers of Valley homes continue to be investors, according to public records.
More than 1,300 foreclosure homes sold in June at what are known as trustee-sale auctions, the Information Market said. Those sales aren’t included in the overall tally for metro Phoenix’s home sales because public documents record them differently. But those auction sales definitely contribute to a shrinking inventory and higher home prices.
Many auction buyers are paying cash, and bidding wars are typical now as people try to buy the houses on the courthouse steps, hoping either to turn them into rentals or flip them for a quick profit.
The new-home market continues to struggle. Housing analyst RL Brown, who publishes the “Phoenix Housing Market Letter,” said the wide disparity between foreclosure resales and new-home prices will continue to hurt the homebuilding market.
Short sales in the Valley climbed almost 50 percent in June from May, according to the Arizona Regional Multiple Listing Service. In these sales, lenders agree to let distressed borrowers sell a home for less than they owe, ensuring the bank gets some money rather than having to foreclose. The increase in these sales signals that more lenders are working with buyers to avoid foreclosure.
Some real-estate agents are finding it more difficult to find homes for clients to buy because listings are steadily falling.
Julie Bieganski, a Phoenix real-estate agent and investor, tracks the drop in listings every day and said it’s much tougher to find deals on homes for herself and clients.
On July 1, Orr’s data showed 28,827 active listings across metro Phoenix, down 8 percent from June 1 and down 30 percent from July 1, 2010.
By Ruth Simon and Jessica Silver-Greenberg – The Wall Street Journal
Back in June 2006, when the housing market peaked, the prospect of a five-year national housing bust seemed unimaginable to most people. And yet here we are, with the latest Standard & Poor’s Case-Shiller index showing that prices hit new bear-market lows, falling back to 2002 levels nationally and to 1990s levels in some battered regions.
Despite all the gloom, however, there are growing indications that it is a good time to buy. Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows. Homes have become more affordable than they have been in years: According to Moody’s Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average. A historic glut of homes, meanwhile, has created a buyer’s market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate ConsultingInc.—some 3.1 million more than normal.
Such conditions might not last long. Moody’s Analytics predicts that the number of distressed sales will begin to fall in 2013, and that prices will begin to edge upward then. Home building is at a virtual standstill, so the supply overhang isn’t likely to get much worse. Meanwhile, demographic indicators such as “household formation”—the number of new households each year—are on the rise, and promise to take a bite out of the glut in coming years.
The upshot: “While we might not see rapid growth in the next couple of years, there are a tremendous number of positive signs that could lead to a rebound,” says Anthony Sanders, a real-estate finance professor at George Mason University.
The short-term outlook isn’t encouraging. Job growth remains weak, foreclosure sales are making up more of the market, and economists are predicting that home prices will fall more in the coming months.
But the long-term benefits of homeownership remain very much intact. For now, at least, you can deduct the mortgage interest on your taxes—a big perk for people in higher tax brackets. You get to paint your walls any color you wish, without having to clear it with a landlord. And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with.
So what might the next five years look like? Once the foreclosure mess begins to clear up, say housing economists, the traditional drivers of the housing market—demographics, affordability, loan availability, employment and psychology—should take over.
Here is a glimmer of what the future may hold: While overall home prices fell by 7.5% in April over the same period a year earlier, according to CoreLogic, a Santa Ana, Calif., provider of real-estate data and analytics, if you exclude distressed sales, prices were off just 0.5%. So if you are in a market that isn’t battered by foreclosures, you may be close to a bottom already.
“The regular marketplace is hanging tough,” says CoreLogic chief economist Mark Fleming.
Here is a look at five key factors that will govern local markets over the next several years: