Today in the Arizona Republic or on-line at www.AZCentral.com I found this article by Catherine Reagor about the falling home prices in the metro Phoenix area. We are not exactly seeing this in the trenches, but let me explain what we are seeing.
First, this article states the low point of average price per square foot of $82.11 in April of 2009. The MLS shows a low of $73.51 in March of 2009 and you would know that if you were following my monthly updates. There are times when garbage in garbage out can affect the MLS numbers, but they are usually corrected over time.
What we are seeing with our buyer and sellers is several different markets out there. Of course there are Foreclosures, Short Sales and Retail (people with equity) homes for sale. But also we are seeing a wide range in the condition of these homes. This is in all 3 categories, so we see turn key Foreclosures, Short Sales and Retail homes and we see them trashed. This creates a valuation problem. Buyers prefer turn key and will pay more for those homes, but comps are all over the place.There is no consistency at all in the market today. One day a nice home will sell for $200 per square foot in a neighborhood and the next it sits at $180 per foot. Or the other way around. We have plenty of buyers, oh around 15, that would buy a home today if one were available in reasonable condition. This is our market’s biggest difficulty. This is also where the Tax Credit helped. For those against the tax credit, what it did was guarantee a home buyer they would have money to fix up these distressed homes. It was fantastic. With the $1 trillion plus invested by the government, I believe the tax credit accounts for about $25 billion or 2.5%. The other 97.5% went into the banks and investors pockets. The Rich get Richer!
Catherine also discusses Short Sales and their affect on the market. While Short Sales are increasing in market share, their affects on the real estate market and home sellers are all over. First, for one to sell a Short Sale, in most cases it has to be priced below the market value. Why would a buyer wait 3 to 6 months for a maybe on a purchase unless they are getting CONSIDERATION. The consideration they receive is a lower price. However, the banks are now starting to fight this tooth and nail. This consideration would not be needed if they could just do their job in a reasonable fashion. Say, 10 top 14 days for an approval, Guaranteed! This would stop property devaluation and bring on appreciation over night. Too bad they don’t understand they are shooting themselves in the foot. Oh no, that is the tax payer. We must picking up the bill, because homes continue to sell with the banks loosing 40 to 70% of the loan amount, yet they are profiting??????
Wells Fargo is one of the leading banks in the field getting approvals in less than 2 weeks. This fact should be all over the press and this is what congress should be asking Bank of Destroy America about. Why do you continue to Destroy when you have the power to stop this, follow Wells Fargo you idiots!
Short Sales help the market when they sell in reasonable condition. What I mean here is that the owner keeps up the home in what ever way, living there, renting it or what ever. This keeps the home from deteriorating as we see some of the Foreclosure homes. When they get trashed, sell well below market or their delay to close keeps a buyer from closing on a home; they are hurting the market and property values.
Short Sales can be very advantageous to the home sellers or borrowers. Through Short Sale a home seller can save their credit, buy a home again in a few short years(thus re-entering the market at these lows) and remove the ability for the bank to come after them for RECOURSE. In Arizona, we are a non-recourse state for purchase money mortgages(please talk to a legitimate attorney for your specific case) that means with Foreclosure they cannot pursue a deficiency judgment against the home seller for the loss. In most cases, the lender will give the home seller a Full Release for a Short Sale. This protects the home seller from future recourse on that Note. Some banks, like Bank of Destroy America, puts tricky language in their approval letters and is going after home owners for recourse, even with non-recourse loans. Their tricky dicky lawyer language changes the the home seller’s protection. Short Sellers should always have an attorney review their approval letter, with the understanding attorneys never give straight answers.
The fact is that Foreclosures sell on average for less money on a price per square foot basis than Short Sale homes, when looking at the market as a whole. However, in just about every neighborhood where there are Short Sales, they sell for less than bank owned homes in similar condition. “So, Jeff why are statistics showing a different result?” I don’t know all the answers but I do know that most Realtors and home owners don’t have the resources to do Short Sales for lower priced homes, for example under $100k. It costs too much money for a Realtor to work that Short Sale versus the commission paid. Or maybe under $80k. On the contrary, every agent wants the $500k and up Short Sales. When the product mix of Short Sales leans to the upper end and the product mix of Foreclosure homes leans to the lower end, you get skewed results. This is so easy to see. At every price range of $100k increments, I guarantee if you list a Foreclosure home in the same condition as a listed Short Sale home the Foreclosure home will sell on average for 15% more and quickly. This is the FACT JACK…
Well I have to get to work. I hope this makes sense to you. Please call me if you have questions.
Just my opinion…Jeff Cameron 480-502-7699
Falling prices prompt concern over home values
by Catherine Reagor – Jul. 20, 2010 04:37 PM
The Arizona Republic
Home prices in metropolitan Phoenix have been slipping during the past month, prompting concern about a double dip in the region’s housing values.
So far, Phoenix-area home prices are still well above the low they hit in March 2009.
The average price-per-square-foot of metro Phoenix home sales fell to $89.38 this week, according to Mike Orr’s Cromford Report, which analyzes daily sales data from the Arizona Regional Multiple Listing Service and public records. Current sales prices are down about 4 percent from a month ago when the average square-foot sales price was $92.90. The low for the region’s home prices during this downturn was $82.11 per square foot on April 6, 2009.
Based on pending sales prices, Orr forecasts home prices will continue to fall next month. Besides the data from sales in progress, or pending sales, recorded by the listing service, there are several other statistical reasons for Orr’s downbeat prognosis.
• Short sales, priced below normal or traditional home sales, are climbing. During the past month, almost 28 percent of all of the region’s home sales were short sales, up from 21 percent the month before. Short sales are better for home values than foreclosures but still pull down overall prices.
• The prices of foreclosure homes taken back by lenders and resold had been climbing in the Phoenix area until June 25 but have fallen nearly 7 percent since then.
• The number of foreclosure homes lenders are trying to resell has climbed 21 percent since June 8.
• Normal or traditional home sales, excluding foreclosures and short sales, are down 30 percent from last month.
The housing market received a boost from the federal homebuyer tax credit. But most of those sales have now been recorded. Some housing-market analysts believe Arizona’s new immigration law is impacting home sales and foreclosures in the state. But whether the impact is negative or positive isn’t clear yet.
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