Phoenix Real Estate Market Update – July, 2013

2013 continues to be “predictable” – as much as real estate in Arizona can be considered predictable in the last several years! Predictable as it has followed the pattern of last year. However, real estate history never completely repeats itself – therefore addressing market conditions still remains important for the consumer. Here are a few key areas to consider:

Supply: Supply concerns of 2012 proved to be a shifted market as far as supply went. As the distress pipeline began to dry up, active listings began to slide downward – quickly. The constricted supply of new listings to the market in 2012 was the lowest in 12 years. Unfortunately, we have fallen 2.6% below last year. By expert predictions, the drop in distressed sales was going to be replaced by the long suffering equity home seller who would then be able to sell. That is not occurring. Add to the strain that new home building is also hugely constricted as the building community plans to hold out for higher pricing before opening the flood gates of new builds. Limited resale, combined with the last 5 years of almost no new builds, is creating a very short supply of homes. More specifically, homes priced below $150,000 are in extremely short supply. Another interesting shift is that the number of flips (homes purchased to fix-up and quickly resell) is down 58% from last year.

Demand: Unlike 2005, demand is declining – somewhat – along with supply. Some of this drop is related to larger cash infused investor buyers. While “normal” buyers are still very active in the market, small investors outweigh the large institutional buyers. Investor purchases which peaked at 40% of purchases have now dropped well below 30% and looks to be continuing downward. Despite this, there is NOT enough supply to satisfy demand. To sum up the supply/demand issue, Valley real estate expert Michael Orr stated, “We don’t have enough homes on the market to meet demand, and there is no significant source of new supply. Hence prices rise. There is nothing fake about that.”
Foreclosures: Foreclosures (fortunately) continue to dwindle in Arizona. The change from 2010 (AZ was in the top 5 for delinquent loans) to where AZ is today – #9 in the country for fewest delinquent loans – is amazing. To quote Valley real estate expert Michael Orr once again: “Pending foreclosures in Maricopa County (including all property types) dropped to 8,147 in June. This is the lowest number we have seen since August 23, 2007, almost six years ago. It is also lower than we saw in the period January through April 2002 when the economy was being hit in the slowdown that followed the 9/11 attacks. Given the large growth in population since 2002, the current level of pending foreclosures, and the fact that the number is still dropping by 6% to 8% per month, this is a very positive sign for the housing market in Maricopa County. The maximum pending foreclosures we ever saw was 51,022 in December 2009 and we have now fallen 84% from that peak. We anticipate that foreclosures will continue to drop quickly and fall below normal levels in the fairly near term, probably before the end of 2013. Given strict underwriting over the last 4 years we expect foreclosure rates to drop well below normal in 2014 and for several years beyond that before returning to normal.”
Mortgage Debt Forgiveness: For homeowners considering a short sale (even with rising values many homeowners are still underwater) we urge you to consider acting now rather than later. Congress extended the Mortgage Debt Relief Act for one year (to expire on 12/31/13). Unlike last year where we felt confident of an extension, another extension is not a sure thing. As the tax piece of short selling (or foreclosure) could cost home sellers thousands of dollars that would be avoided if they act now, I urge those in an underwater situation to ac tNOW. Short sales take time and December comes very quickly in the land of short sales.
As always, I stand ready to guide both Sellers and Buyers in this (or any) market. If you are considering a home sale or purchase, you owe it to yourself to know what I will do for you. A simple call or email and I can provide you with a strategic plan to assist you. And the best part, there is no cost to you. I look forward to earning your business and the opportunity to work with you. Call (480-239-3023) or email (john.groves@azmoves.com) anytime. I’m here to help.
Enjoy your summer-
John
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