Promising signs from Valley housing data
In March, foreclosures fell, sales in some areas hit record highs
Apr. 4, 2009
For the first time in years, there's good news coming out of metropolitan Phoenix's housing market.
In March, home sales soared to levels not seen since 2005, foreclosures fell for the first time in a year and prices showed signs of leveling off in some areas.
The Valley's most affordable communities, including many edge neighborhoods, are leading the housing rebound. "The affordable end of the Valley's housing market could finally be at the bottom looking up," said Mike Orr, a real-estate agent and analyst who publishes the Cromford Report. "Homes priced for $150,000 or lower are selling fast and even getting multiple offers. My money is on home prices in many of those neighborhoods being slightly higher by June."
High-priced areas such as Paradise Valley and north Scottsdale aren't seeing the same increases in home sales, though, and are likely to experience more price declines, Orr said.
Valley pending home sales hit 7,550 in March, a 70 percent jump from a year earlier, according to the Cromford Report, which has partnered with the Information Market to track housing indicators by analyzing data from the Arizona Regional Multiple Listing Service and real-estate records. The data track mostly resales but include some new-home sales.
Pending home sales, more than 90 percent of which become final, are a leading indicator for the housing market and include only deals that have a signed contract and set price.
Several Valley cities, including Phoenix, Avondale, Glendale, Peoria, Surprise and Goodyear, posted record sales in March, even beating monthly sales figures from the housing boom of 2005-06.
All of the West Valley cities seeing record sales were battered by foreclosures last year. Those foreclosures pushed down home values.
Now investors, first-time home buyers and retirees are buying those foreclosed homes from lenders. About two-thirds of all Valley home sales are foreclosure properties being resold. All those sales are putting a serious dent in the foreclosure inventory.
"There aren't that many foreclosure homes on the market now," said Orr, who is in the process of buying a foreclosure home in Queen Creek for $94,000. "Many of those deals will soon be gone."
In Queen Creek, the number of foreclosure homes for sale has dropped to 79 at the end of March from 169 in February.
Foreclosure homes are selling nearly twice as fast as they did last fall, when lender-owned homes began to dominate the Valley's housing market. On average, it is taking 117 days for a foreclosure home to sell now, compared with 227 days in November.
The number of foreclosure homes on the market could continue to fall. There were 3,377 foreclosures in metro Phoenix during March, almost 2,000 less than in February. At the same time, foreclosure cancellations nearly doubled to 3,168 last month.
Preforeclosures hit a new high of 10,689 in March. However, Tom Ruff of the Information Market doesn't believe all those will turn into foreclosures. He cites as reasons the growing number of successful short sales in the Valley and the loan-modification programs available under the federal government's housing plan.
Short sales can drag down prices but not as much as foreclosures.
The average sales price per square foot of a Valley foreclosure home has held steady at $66 for the past three weeks. The Valley's overall average price per square foot fell in March to $83 from $89 in February. But Orr doesn't see that number going below $80 because of the recent increase in demand for houses and the shrinking inventory of foreclosure homes.
The Valley's median home price fell in March to $129,000 from $136,000 in February. Prices are a lagging indicator of deals made months ago, before President Barack Obama's housing-rescue plan was announced and before sales began to pick up.
Orr says home prices will continue to fall in Paradise Valley, where there are about 550 houses for sale and only about six are selling a month.
At the current sales rate, that's at least a seven-year inventory of houses on the market in Paradise Valley. In most other parts of the Valley, the inventory of homes for sale is less than a year.
If sales continue to climb in other metro Phoenix communities this month and in May, there's a good chance home prices in the Valley's most affordable communities could tick up in June.
"April will be the turning point for the housing market," Orr said. "People are beginning to perceive we are at the bottom, and there's no reason to wait to buy anymore."