Foreclosures, REOs Account For 67% Of Phoenix Home Resales In August
For all those curious what the potential impact of an escalation in the GMAC Bank scandal may mean for the housing market, look no further than Phoenix. According to a new report by the Arizona State University W.P. Carey School of Business in Phoenix alone foreclosures and REOs account for 67% of all home sale transactions. According to author Jay Butler, out of 8,790 resales, 3,990 were foreclosure sales. This compares to 3,865 in July and 3,085 in August 2009. Adding REO sales to foreclosures, and the total become a whopping 67% of home buying activity in August, meaning just a third of all resales occurred in the traditional method were a buyer and a seller arrived at a price after arms-length negotiations. This is stunning, as it means that should the foreclosure pipeline get clogged up courtesy of the GMAC snafu, and price discovery will become completely impossible, as banks are stuck holding real estate they are legally prohibited from offloading in judicial states. Luckily for Arizona, it is not such a state. For home buyers in the 23 states in which GMAC has halted evictions and certain foreclosures indefinitely, the home buying process is about to get really complicated.
More observations from the ASU report:
- The median price for a regular-way sold home was $135,000, compared to $137,500 in July and $138,000 in August 2009
- The median price for a foreclosure property was $147,050, compared to $154,970 in July and $139,800 a year earlier
- August saw 22 foreclosures of homes worth more than $1 million
- 7 of these were for homes worth more than $2 million
- Condominium sales saw the same declining trend, with the median price of $97,560 a marked declined from July's median of $110,235 and August 2009's $100,820
- The median square footage for a single-family home recorded as foreclosed in August 2010 was 1,680 square feet (1,705 for a year ago), while it was 1,800 square feet (1,790 for a year ago) for a market transaction home. In the townhouse/condominium sector, the median square footage for a foreclosed unit was 1,055 square feet (1,050 for a year ago), while the traditional market units was 1,090 square feet (1,150 for a year ago).
And lastly some very gloomy observations on the market from the author:
As the year comes to an end, it is not unusual for median home prices to decline from the levels found in resale home buying season. The fundamental reason is sales activity declines in response to holiday and school activities that allow little time or desire to buy a home. Beyond the impact of foreclosure activity, the absence of a strong move-up market, which is fundamental to a housing recovery, will also limit any growth in home prices.
Soon there will be a very notable move in home prices. However, unlike what Obama and Bernanke desire, it won't be up.
Full REALTY STUDIES August 2010 RESALE HOME MARKET report