Arizona Property Management and Investments
www.AZEZRentals.com
Toll Free: 888-777-6664 ext 111
Fax: 888-777-3711
Glendale: 5723 W Glendale Ave. Glendale AZ 85301
Mesa: 4856 E Baseline RD suite 104 Mesa AZ 85206
Sun City: 13211 N 103rd Ave. Suite 2 Sun City AZ 85351
Phoenix-area home prices remain too cheap
by J. Craig Anderson, Ryan Konig and Matthew Dempsey - Oct. 8, 2011 08:35 PM
The Arizona Republic
The Phoenix-area housing market has seen significant improvement in a number of fundamental areas thus far in 2011, including decreases in housing supply, the number of monthly bank foreclosures and the length of time it takes to sell a home. Still, these promising changes in the market have given rise to a question that has confounded many sellers, lenders, real-estate agents and brokers:
If the fundamentals have improved, why haven't home prices increased?
"Normally, the laws of supply and demand would kick in, and it would affect the price, just like you learn in economics class," said Matt Widdows, president and CEO of Phoenix-based residential-real-estate brokerage HomeSmart International.
The supply of available homes has shrunk dramatically during the past year, while buyer demand - particularly among investors - remains strong.
But an Arizona Republic analysis of Valley Home Values data provided by Glendale-based Information Market from Jan. 1 through Aug. 31 shows that home prices continued to drop from 2010 to 2011 in all but a handful of Phoenix-area communities.
In metro Phoenix, just three communities - Carefree, Litchfield Park and Rio Verde - experienced positive growth in the median home price from 2010 to 2011.
Wittmann had zero growth in its median home price, and all other communities had negative growth.
Overall, the Phoenix area's median price fell to a 10-year low of $116,500 through the year.
The laws of supply and demand, it would seem, have been suspended. Why?
Appraisal issues
The first thing to understand, investment homebuyer Jeff Hale said, is that home prices are not driven entirely by supply and demand.
There is an intervening force that affects the sale price of every home purchased with a mortgage: the appraisal.
Hale, purchasing coordinator for Phoenix-based AZ Equity, said the appraisal places an artificial cap on the amount a home's seller can charge, because lenders will not allow the buyer's mortgage to exceed a home's appraised value.
Appraisers look at a home's size, quality, age, condition and location, along with recent sales of comparable homes in the same general area, to determine an appraised value.
Those comparable sales, or "comps," are where the problem often lies when an appraisal comes in unreasonably low, Hale said.
"They can choose whichever comps they want," he said, such as the sale of a bank-owned home in which the kitchen had been ripped out. "That becomes a really difficult thing to overcome."
Sue Miller, president of the Appraisal Institute's Phoenix chapter and a certified residential appraiser, said appraisers have been doing their best to match homes they are hired to evaluate with relevant comps.
Miller, of Phoenix-based Miller Pipher Inc., said appraisals merely reflect the local housing market's many ongoing problems.
"As appraisers, we have to look at the data," she said. "In some of the areas we're appraising, 80 percent of the sales are foreclosures."
When the housing market crashed, appraisers became easy targets for blame and criticism for the way they had evaluated home values during the bubble years, when home prices were inflated to an unsustainable level.
Their reaction has been to err on the low side, Hale said, to steel themselves against further accusations of overvaluing properties.
Widdows said another problem is that appraisers sometimes don't have enough available information to determine the appropriateness of certain comps.
"The Number 1 complaint that we hear from our agents is low appraisals," he said. "There is a little bit of confusion in the marketplace, because you're comparing bad apples with good apples."
Miller agreed that lack of information can be a problem, particularly if the comparable sale occurred at auction or if the buyer was an investment firm.
In some cases, she said, the appraiser simply doesn't do a very good job.
"There are a lot of appraisers that aren't doing as thorough a job as they should," Miller said.
Investment homes
The explosion of demand for single-family rental properties in the Phoenix area also has affected home values in various ways, according to investors, agents and brokers.
Most significantly, it has set the optimal price point at the low end of the market, they said, because investors can minimize their financial risk and turn a profit more quickly on a rental home if the purchase price is low.
Many investment firms that amass large portfolios of rental homes have connections within the housing and lending industries that allow them to buy homes at well below market price, Miller said.
Those bargain purchases contribute to the overall downward pressure on home prices, she said.
"Investment firms can buy homes cheaper because they know who to go to," Miller said.
Sometimes, mortgage lenders anxious to unload a large quantity of foreclosure homes will slash their asking prices in order to sell them in bulk to investment firms.
Phil Mahr, an investment homebuyer and real-estate agent with Glendale-based Arizona Property Management and Investments, said one of the biggest contributors to low prices is the unending flood of homes coming up for auction at trustee sales, where lenders attempt to avoid repossession of foreclosure homes by allowing third parties to bid on the properties.
Most of the homes up for bid at trustee-sale auctions are being purchased for significantly less than market value, because they are sold as is, with no warranty against damage or defect.
The typical buyer is a rental-home investor, although Mahr said that trend has begun to shift as consumers have gotten more comfortable with the idea of competing with investment buyers on the courthouse steps.
"It's become popular now, so we're actually seeing prices rise here at the trustee's sale auctions," he said.
As home prices in most areas continue to decline, Miller said, some investors are questioning whether they should hold back until the market stabilizes.
"A lot of these investors are saying, 'Whoa, whoa, whoa - let's wait,' " she said.
Lack of confidence
Rental-home investors aren't the only prospective buyers feeling trepidation about future home-price declines, said Kristie Austin, a Scottsdale-based investment buyer of foreclosure homes.
"I think everybody is still scared to buy a home," including consumers, Austin said. "It's still a big financial risk."
Jim Sexton, owner and designated broker of Phoenix-based residential-real-estate brokerage John Hall & Associates Inc., said lack of consumer confidence continues to plague the housing market and is one of the biggest factors dragging down home prices.
With a non-stop barrage of depressing or contradictory statistics about the housing market presented to the public, many eligible homebuyers have decided not to buy until they see clearer evidence of an economic recovery on the horizon.
Sexton said there are two serious problems with the way housing-market trends are being reported by the news media.
The first problem is timeliness, he said. By the time home-price analyses reach consumers, the data upon which they are based can be anywhere from 1 to 3 months old.
That means consumers are using information about the past to make decisions about future buying behavior, which Sexton said perpetuates the housing market's downward cycle.
The second problem is that most of the housing-market data reported by the media is too general, he said, lumping together hundreds of discrete submarkets and localized pricing trends into a single, useless statistic.
"Grouping Maricopa County into all sales doesn't tell you much about the market," Sexton said.
Economic woes
Still, most housing-market experts agreed that low prices aren't just the result of a perception problem.
There's a serious reality problem to contend with, too.
High unemployment, consumer credit woes, lender losses and other broad economic factors have contributed to the prolonged home-values slump.
"A big part of it is just the stagnant economy," Miller said.
Arizona is expected to gain jobs within the coming year, but it will be fewer than earlier forecasts had projected, state economists said last week.
By the end of 2011, Arizona should have gained about 15,500 non-farm jobs since December 2010, and by the end of 2012 it is expected to have gained an additional 14,400 jobs.
Those figures are lower than the gains state economists had projected in April.
Arizona unemployment in August was 9.3 percent, slightly above the national jobless rate of 9.1 percent.
Sunday, October 9, 2011
Phoenix-area home price changes vary greatly
Arizona Property Management and Investments
www.AZEZRentals.com
Toll Free: 888-777-6664 ext 111
Fax: 888-777-3711
Glendale: 5723 W Glendale Ave. Glendale AZ 85301
Mesa: 4856 E Baseline RD suite 104 Mesa AZ 85206
Sun City: 13211 N 103rd Ave. Suite 2 Sun City AZ 85351
Phoenix-area home price changes vary greatly
by J. Craig Anderson, Ryan Konig and Matthew Dempsey - Oct. 8, 2011 08:40 PM
The Arizona Republic
Home prices continued to drop from 2010 to 2011 in all but a handful of metro Phoenix communities, according to an Arizona Republic analysis of Valley Home Values data provided by Glendale-based Information Market.
In metro Phoenix, just three communities - Carefree, Litchfield Park and Rio Verde - experienced positive growth in the median home price from Dec. 31, 2010, to Aug. 31, 2011.
Wittmann had zero growth in its median home price, and all other communities had negative growth.
im Sexton, owner and designated broker of Phoenix-based residential real-estate brokerage John Hall & Associates Inc., said it isn't unusual to see such wild swings in housing-market performance.
He said metro Phoenix is filled with distinct "pockets" of housing activity, some showing a healthy rebound while others continue to stagnate.
"Phoenix has always been a pocket market," Sexton said.
The biggest positive home-price growth among communities was in Carefree, in the northeast Valley. Carefree's median home price increased 9.4 percent to $625,000.
The biggest negative growth was in Tonopah, far in the West Valley, where the median home price fell 18.5 percent to $55,000.
Overall, the Phoenix area's median price fell to a 10-year low of $116,500 in September.
At the ZIP code level, the biggest positive median-price growth was in central Scottsdale's 85262, where the median increased 12.7 percent to $620,000.
The biggest negative growth was in ZIP code 85051 in northwest Phoenix, where the median fell 25.4 percent to $55,000.
The community with the highest overall median home price was Paradise Valley, with a median of about $1.1 million. Tonopah had the lowest median price ($55,000).
At the ZIP code level, the highest median home price was in Paradise Valley's 85253 ($1.1 million), followed by 85377 in Carefree ($625,000).
The ZIP code with the lowest overall median price was 85009 in west-central Phoenix ($26,000), followed by the nearby 85017, also in Phoenix ($35,000).
In terms of home-sales volume by community, Phoenix was the leader by a huge margin from January through August, with more than three times the sales volume of runner-up Mesa. Phoenix had 15,992 home sales, and Mesa had 5,058 sales. The difference was commensurate with the population gap between Phoenix, which has about 1.4 million residents, and Mesa, which has about 439,000 residents, according to 2010 U.S. Census Bureau data.
The single ZIP code with the highest sales volume was 85326 in Buckeye, which had 1,186 home sales. It was followed by 85339 in Laveen, with 1,066 sales.
On the home-foreclosure front, Tonopah fared the worst of all Phoenix-area communities, with foreclosures accounting for 53.6 percent of all home-sale transactions. Sun City West had the lowest foreclosure rate in metro Phoenix, with home foreclosures representing 4.4 percent of all sale transactions.
Sue Miller, co-owner of Phoenix-based appraisal firm Miller Pipher Inc., said the traditional laws of real estate still apply in a depressed housing market.
"It's all about location, location, location," she said.
www.AZEZRentals.com
Toll Free: 888-777-6664 ext 111
Fax: 888-777-3711
Glendale: 5723 W Glendale Ave. Glendale AZ 85301
Mesa: 4856 E Baseline RD suite 104 Mesa AZ 85206
Sun City: 13211 N 103rd Ave. Suite 2 Sun City AZ 85351
Phoenix-area home price changes vary greatly
by J. Craig Anderson, Ryan Konig and Matthew Dempsey - Oct. 8, 2011 08:40 PM
The Arizona Republic
Home prices continued to drop from 2010 to 2011 in all but a handful of metro Phoenix communities, according to an Arizona Republic analysis of Valley Home Values data provided by Glendale-based Information Market.
In metro Phoenix, just three communities - Carefree, Litchfield Park and Rio Verde - experienced positive growth in the median home price from Dec. 31, 2010, to Aug. 31, 2011.
Wittmann had zero growth in its median home price, and all other communities had negative growth.
im Sexton, owner and designated broker of Phoenix-based residential real-estate brokerage John Hall & Associates Inc., said it isn't unusual to see such wild swings in housing-market performance.
He said metro Phoenix is filled with distinct "pockets" of housing activity, some showing a healthy rebound while others continue to stagnate.
"Phoenix has always been a pocket market," Sexton said.
The biggest positive home-price growth among communities was in Carefree, in the northeast Valley. Carefree's median home price increased 9.4 percent to $625,000.
The biggest negative growth was in Tonopah, far in the West Valley, where the median home price fell 18.5 percent to $55,000.
Overall, the Phoenix area's median price fell to a 10-year low of $116,500 in September.
At the ZIP code level, the biggest positive median-price growth was in central Scottsdale's 85262, where the median increased 12.7 percent to $620,000.
The biggest negative growth was in ZIP code 85051 in northwest Phoenix, where the median fell 25.4 percent to $55,000.
The community with the highest overall median home price was Paradise Valley, with a median of about $1.1 million. Tonopah had the lowest median price ($55,000).
At the ZIP code level, the highest median home price was in Paradise Valley's 85253 ($1.1 million), followed by 85377 in Carefree ($625,000).
The ZIP code with the lowest overall median price was 85009 in west-central Phoenix ($26,000), followed by the nearby 85017, also in Phoenix ($35,000).
In terms of home-sales volume by community, Phoenix was the leader by a huge margin from January through August, with more than three times the sales volume of runner-up Mesa. Phoenix had 15,992 home sales, and Mesa had 5,058 sales. The difference was commensurate with the population gap between Phoenix, which has about 1.4 million residents, and Mesa, which has about 439,000 residents, according to 2010 U.S. Census Bureau data.
The single ZIP code with the highest sales volume was 85326 in Buckeye, which had 1,186 home sales. It was followed by 85339 in Laveen, with 1,066 sales.
On the home-foreclosure front, Tonopah fared the worst of all Phoenix-area communities, with foreclosures accounting for 53.6 percent of all home-sale transactions. Sun City West had the lowest foreclosure rate in metro Phoenix, with home foreclosures representing 4.4 percent of all sale transactions.
Sue Miller, co-owner of Phoenix-based appraisal firm Miller Pipher Inc., said the traditional laws of real estate still apply in a depressed housing market.
"It's all about location, location, location," she said.
Phoenix-area real estate collapse echoed troubles
Arizona Property Management and Investments
www.AZEZRentals.com
Toll Free: 888-777-6664 ext 111
Fax: 888-777-3711
Glendale: 5723 W Glendale Ave. Glendale AZ 85301
Mesa: 4856 E Baseline RD suite 104 Mesa AZ 85206
Sun City: 13211 N 103rd Ave. Suite 2 Sun City AZ 85351
Phoenix-area real estate collapse echoed troubles
Foreclosure wave's path marks how economy fell
by Catherine Reagor, Matt Dempsey and Ryan Konig - Oct. 9, 2011 12:00 AM
The Arizona Republic
A look at metro Phoenix's foreclosure crisis over the past five years shows an economic crash moving through time and space.
The collapse started in new-housing areas on the fringes and then swept inward, hitting more established areas as the unemployment rate climbed. Now, as the stock market struggles and speculation swirls about another recession, foreclosures are flaring in the Valley's luxury-home neighborhoods.
A new Arizona Republic analysis, which maps out every home in default in the region over the past five years, is the first comprehensive look at the wave of foreclosures that has swept the Valley since the market began its steep decline in 2007.
The analysis, based on data from Phoenix foreclosure-information service AZ Bidder, plots individual foreclosures and overall trends by year.
It shows how the Valley's foreclosure crisis was more than one crisis. Foreclosures arose in waves, driven first by problematic mortgages, then by the job woes of the recession and now by lingering economic effects being felt in expensive neighborhoods.
The data also hints at where some homeowners may see the long-declining values of their homes begin to rise.
Some areas already are seeing their annual number of foreclosures decline. With that, a few now see slight increases in home prices, or at least much smaller decreases. In other areas, foreclosures persist, lingering chapters in the ongoing story of the crash.
"In most cases, all you have to do is follow the foreclosures in the Phoenix area to understand where the area's housing and subsequent economic problems began and then how far-reaching the problem is now," said Arizona economist Elliott Pollack. "It started in 2007-08 with people on the peripheries who bought homes they couldn't afford, and then, as the unemployment rate climbed, the foreclosure problem spread."
Sub-prime woes
Communities on metro Phoenix's edges sprawled outward during the first half of the past decade, adding swaths of new homes as prices soared. To own these homes, many buyers used subprime mortgages and loans with small down payments.
In some cases, these buyers were aspiring homeowners who didn't have enough income to buy the houses through traditional loans. In other cases, buyers were investors, who simply wanted to snare a profit on rising home values while putting little money down.
The high-risk loans came with adjustable interest rates, and rates began to climb about the same time home sales and prices began to fall. Homeowners couldn't sell or refinance because they already owed more than their now-declining home values. Foreclosures ensued.
Many investors walked away from their mortgages because they had put only a few thousand dollars down. Many of the homes in these new neighborhoods were never occupied before they went into foreclosure.
An analysis of foreclosures shows a sudden spike in late 2007 and early 2008, concentrated in fringe areas: far north Phoenix, the far southeast Valley at the edge of Pinal County, and far western areas including Peoria, Surprise and Buckeye. A few affordable areas closer in also saw foreclosures spike, including Maryvale in west Phoenix, where borrowers also took out high-risk loans.
Four years later, in some of those areas, foreclosures are falling and home prices are beginning to stabilize or even climb.
"Many of the outer edges of the Phoenix area have quietly been recovering," said Tom Ruff, analyst with the Information Market, a Phoenix real-estate data firm. "Foreclosures started first in those areas, and now either homeowners or investors have purchased the houses for prices that will allow them to hold on for a while."
Rising joblessness
As Phoenix's foreclosure crisis crept inward from the fringes during late 2008, it was being driven not just by subprime lending but also by the economy at large.
The state and the nation had fallen into a recession. Hundreds of thousands of jobs, many in the construction industry, were lost in Arizona.
As metro Phoenix's unemployment rate climbed, so did foreclosures. The number of borrowers losing Phoenix-area houses to lenders hit a record in 2009.
Foreclosures began to affect communities closer in, where less speculation and new building had taken place. Chandler, Gilbert and Glendale, as well as central and north Phoenix, began to see foreclosures climb and home values fall.
"There are too many homeowners in many of the Valley's older neighborhoods who had been making their payments for many years, ignored the housing boom but now can't afford their mortgage because one of the breadwinners has lost their job," said Michael Trailor, director of the Arizona Housing Department. "These are some of the saddest foreclosures."
Households that needed two incomes to pay their mortgages began to struggle as one person lost a job.
High-end gets hit
Areas with the priciest houses have been some of the last to see the big increases in foreclosures. It has taken longer for the economy to catch up with most of these homebuyers, through job losses, disappearing bonuses or stock-market plunges. Some homebuyers in high-end neighborhoods, including in Paradise Valley, also stretched and took out risky loans to buy more house than they could afford. But unlike on the fringes, these loans took longer to go into foreclosure.
Mortgages for very large amounts - above a varying threshold that has never been higher than $500,000 in metro Phoenix - aren't insured by Fannie Mae and Freddie Mac. With these large loans, rather than simply passing along their losses to the federal mortgage agencies, lenders suffer the losses themselves. So lenders have been slower to foreclose on these high-end homes.
Foreclosures did not begin a serious climb in metro Phoenix's priciest neighborhoods until late 2009.
"The luxury market has been last to be hurt by foreclosures," said Paradise Valley real-estate agent Walt Danley. He said in some cases homeowners with multimillion-dollar mortgages haven't made their loan payments for many months but lenders have acted more slowly, focusing on lower-priced homes first.
Foreclosure future
Metro Phoenix foreclosures have been declining slowly since early 2010.
When foreclosures slow, an area's home prices should start to rebound or at least stabilize, real-estate analysts say. Some metro Phoenix neighborhoods are starting to see signs of a recovery.
The housing market is too big to follow just one trend, and the location of the neighborhood has at least as big an effect on prices as does the foreclosure rate. So not all areas are seeing the foreclosure decline translate into higher home prices.
Still, "the age of the foreclosure is starting to come to an end," said Michael Orr, publisher of the Cromford Report, an online daily real-estate analysis publication. The region's overall median price, he said, "will almost certainly rise as a result" in the next year.
Metro Phoenix foreclosures fell in September after climbing for the first time this year in August. The median price of a resale home in the region fell to $112,200 in August, its lowest level in more than a decade. But in September, the median price showed signs of rebounding and climbed back to $116,500, its second-highest level this year.
"I think we are about 80 percent through this foreclosure mess," Ruff said. "Some parts of the Valley are definitely farther ahead in the recovery process than others. . . . The worst of foreclosures should be behind metro Phoenix."
www.AZEZRentals.com
Toll Free: 888-777-6664 ext 111
Fax: 888-777-3711
Glendale: 5723 W Glendale Ave. Glendale AZ 85301
Mesa: 4856 E Baseline RD suite 104 Mesa AZ 85206
Sun City: 13211 N 103rd Ave. Suite 2 Sun City AZ 85351
Phoenix-area real estate collapse echoed troubles
Foreclosure wave's path marks how economy fell
by Catherine Reagor, Matt Dempsey and Ryan Konig - Oct. 9, 2011 12:00 AM
The Arizona Republic
A look at metro Phoenix's foreclosure crisis over the past five years shows an economic crash moving through time and space.
The collapse started in new-housing areas on the fringes and then swept inward, hitting more established areas as the unemployment rate climbed. Now, as the stock market struggles and speculation swirls about another recession, foreclosures are flaring in the Valley's luxury-home neighborhoods.
A new Arizona Republic analysis, which maps out every home in default in the region over the past five years, is the first comprehensive look at the wave of foreclosures that has swept the Valley since the market began its steep decline in 2007.
The analysis, based on data from Phoenix foreclosure-information service AZ Bidder, plots individual foreclosures and overall trends by year.
It shows how the Valley's foreclosure crisis was more than one crisis. Foreclosures arose in waves, driven first by problematic mortgages, then by the job woes of the recession and now by lingering economic effects being felt in expensive neighborhoods.
The data also hints at where some homeowners may see the long-declining values of their homes begin to rise.
Some areas already are seeing their annual number of foreclosures decline. With that, a few now see slight increases in home prices, or at least much smaller decreases. In other areas, foreclosures persist, lingering chapters in the ongoing story of the crash.
"In most cases, all you have to do is follow the foreclosures in the Phoenix area to understand where the area's housing and subsequent economic problems began and then how far-reaching the problem is now," said Arizona economist Elliott Pollack. "It started in 2007-08 with people on the peripheries who bought homes they couldn't afford, and then, as the unemployment rate climbed, the foreclosure problem spread."
Sub-prime woes
Communities on metro Phoenix's edges sprawled outward during the first half of the past decade, adding swaths of new homes as prices soared. To own these homes, many buyers used subprime mortgages and loans with small down payments.
In some cases, these buyers were aspiring homeowners who didn't have enough income to buy the houses through traditional loans. In other cases, buyers were investors, who simply wanted to snare a profit on rising home values while putting little money down.
The high-risk loans came with adjustable interest rates, and rates began to climb about the same time home sales and prices began to fall. Homeowners couldn't sell or refinance because they already owed more than their now-declining home values. Foreclosures ensued.
Many investors walked away from their mortgages because they had put only a few thousand dollars down. Many of the homes in these new neighborhoods were never occupied before they went into foreclosure.
An analysis of foreclosures shows a sudden spike in late 2007 and early 2008, concentrated in fringe areas: far north Phoenix, the far southeast Valley at the edge of Pinal County, and far western areas including Peoria, Surprise and Buckeye. A few affordable areas closer in also saw foreclosures spike, including Maryvale in west Phoenix, where borrowers also took out high-risk loans.
Four years later, in some of those areas, foreclosures are falling and home prices are beginning to stabilize or even climb.
"Many of the outer edges of the Phoenix area have quietly been recovering," said Tom Ruff, analyst with the Information Market, a Phoenix real-estate data firm. "Foreclosures started first in those areas, and now either homeowners or investors have purchased the houses for prices that will allow them to hold on for a while."
Rising joblessness
As Phoenix's foreclosure crisis crept inward from the fringes during late 2008, it was being driven not just by subprime lending but also by the economy at large.
The state and the nation had fallen into a recession. Hundreds of thousands of jobs, many in the construction industry, were lost in Arizona.
As metro Phoenix's unemployment rate climbed, so did foreclosures. The number of borrowers losing Phoenix-area houses to lenders hit a record in 2009.
Foreclosures began to affect communities closer in, where less speculation and new building had taken place. Chandler, Gilbert and Glendale, as well as central and north Phoenix, began to see foreclosures climb and home values fall.
"There are too many homeowners in many of the Valley's older neighborhoods who had been making their payments for many years, ignored the housing boom but now can't afford their mortgage because one of the breadwinners has lost their job," said Michael Trailor, director of the Arizona Housing Department. "These are some of the saddest foreclosures."
Households that needed two incomes to pay their mortgages began to struggle as one person lost a job.
High-end gets hit
Areas with the priciest houses have been some of the last to see the big increases in foreclosures. It has taken longer for the economy to catch up with most of these homebuyers, through job losses, disappearing bonuses or stock-market plunges. Some homebuyers in high-end neighborhoods, including in Paradise Valley, also stretched and took out risky loans to buy more house than they could afford. But unlike on the fringes, these loans took longer to go into foreclosure.
Mortgages for very large amounts - above a varying threshold that has never been higher than $500,000 in metro Phoenix - aren't insured by Fannie Mae and Freddie Mac. With these large loans, rather than simply passing along their losses to the federal mortgage agencies, lenders suffer the losses themselves. So lenders have been slower to foreclose on these high-end homes.
Foreclosures did not begin a serious climb in metro Phoenix's priciest neighborhoods until late 2009.
"The luxury market has been last to be hurt by foreclosures," said Paradise Valley real-estate agent Walt Danley. He said in some cases homeowners with multimillion-dollar mortgages haven't made their loan payments for many months but lenders have acted more slowly, focusing on lower-priced homes first.
Foreclosure future
Metro Phoenix foreclosures have been declining slowly since early 2010.
When foreclosures slow, an area's home prices should start to rebound or at least stabilize, real-estate analysts say. Some metro Phoenix neighborhoods are starting to see signs of a recovery.
The housing market is too big to follow just one trend, and the location of the neighborhood has at least as big an effect on prices as does the foreclosure rate. So not all areas are seeing the foreclosure decline translate into higher home prices.
Still, "the age of the foreclosure is starting to come to an end," said Michael Orr, publisher of the Cromford Report, an online daily real-estate analysis publication. The region's overall median price, he said, "will almost certainly rise as a result" in the next year.
Metro Phoenix foreclosures fell in September after climbing for the first time this year in August. The median price of a resale home in the region fell to $112,200 in August, its lowest level in more than a decade. But in September, the median price showed signs of rebounding and climbed back to $116,500, its second-highest level this year.
"I think we are about 80 percent through this foreclosure mess," Ruff said. "Some parts of the Valley are definitely farther ahead in the recovery process than others. . . . The worst of foreclosures should be behind metro Phoenix."
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