Friday, July 29, 2011

Phoenix Housing Market Showing signs of Life-WSJ


Phoenix doesn’t usually churn out upbeat housing news. So it’s worth noting reports for the market that look, well, at least not bad.
In June, Phoenix had the strongest resale activity in six years, helping to lift total sales from the year-ago month when federal tax credits were boosting the market. There were about 10,500 sales of new and existing houses and condos during June in the metro area covering Maricopa and Pinal counties, up 8.3% from May and 1.5% from June of last year, according to DataQuick, the real-estate research company based in San Diego. Since 1994, when DataQuick began fully tracking Phoenix, sales have risen 1.8% on average from May to June.
“The main thing would be that we beat the year-ago number, and the year-ago number was inflated by the tax credits,” said Andrew LePage, an analyst with DataQuick.
On prices, the news was uneven. Phoenix-area buyers in June paid a median of $122,900 for all new and resale houses and condos, up 2.4% from the month prior but off 12% from last June. (This bolsters the argument that buyers might have been better off to wait until after the tax credits to house hunt.) And then there’s this sobering fact: The June median for Phoenix was almost 54% lower than the peak of $264,100 in June 2006, back when buyers paid whatever it took to buy a home.
As might be expected, distressed sales were a huge factor in perking up the data, with all-cash buyers and investors swooping in, sometimes from abroad, to grab homes at a discount. Distressed sales, meaning both foreclosure resales and short sales, comprised about 64% of the Phoenix resale market. (Phoenix isn’t the only market seeing this trend, as we’ve reported.)
Although the share of homes bought by investors fell somewhat from earlier this year in Phoenix, it was up from last June. The share of cash buyers followed a similar trend, reaching 41% in June. (Those two categories can overlap because investors may pay all-cash.) First-time buyers continued to fall behind, which showed up in the drop in homes purchased with low down payment mortgages backed by the Federal Housing Administration.
It does seem counterintuitive that there would be a slight rise in sale prices despite the bevy of distressed sales. But falling inventory could be a factor; it was down about 11% in June from May in Phoenix, according to Foreclosure filings have also fallen in Phoenix and elsewhere, either due to market saturation or legal problems, according to RealtyTrac, but that could change and inventory could spike.
Brokers in Phoenix say there’s increasing competition for distressed deals. “My business, right now, is probably about 40% investors,” said Susan Ramsey, an agent with Re/Max Professionals and president of the Phoenix Association of Realtors. “They actually see this as probably, if not the bottom, it’s as close as we’ve been. I’m actually seeing prices leveling out.”
Case in point: Ms. Ramsey’s brokerage recently sold a foreclosure property — a three-bedroom home in good condition with a pool and mountain views — for about $233,000, and there were multiple offers.
DataQuick uncovered several other notable trends, including the precipitous drop in new-home sales, down 38% in June from the year-prior month. They were up slightly from May, but it was still the lowest total for a June in 14 years. For builders, these are tough times indeed.

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