In relationship to the local real estate market, not all is bright and shiny in the Valley of the Sun. Despite historically low mortgage rates across the region; Phoenix, Arizona is still reeling from the mortgage crisis sweeping the nation. In February 2009, President Obama visited the state and addressed attendees at a local Town Hall held at the Dobson High School. He remarked "In Phoenix and its surrounding suburbs, the American Dream is being tested by a home mortgage crisis that not only threatens the stability of our economy, but also the stability of families and neighborhoods" (Whitehouse.gov). The challenges still continue.
Time.com has reported that since the housing market's peak value time period in July 2006, Phoenix home values have dropped by has much as 60 percent. High local unemployment numbers (9.7 percent in August 2010) is feeding the frenzy, as that is not the only factor negatively impacting the foreclosure rate, but also scaring potential shoppers from making the commitment. Overall, the local Phoenix real estate market has seen better times.
Phoenix Housing Market Fueled by REO Properties
Within Arizona, Phoenix was considered an epi-center for the mortgage trend. During the real estate heyday, consumers bought McMansions and large homes at will and many of those purchases were financed with toxic, subprime mortgages. When the ill effects of the mortgage meltdown started to spread through the region, many local homeowners ended up underwater on their home loans and some even choose to strategically default on said properties. That move combined with the high foreclosure activity resulted in a slew of properties becoming real estate owned (REO). Within the local housing market, REO properties comprise 67 percent of all home sales.
A new report released by the Arizona State University W.P. Carey School of Business has noted that in August 2010 the city experienced the highest wave of foreclosures during the annual time period. That influx of properties has helped provide a steady stream of inexpensive housing options in the region, and those who have the financial resource are scooping up the bargains. The trend is being experienced in all housing market sectors including luxury homes, single-family detached properties and condominiums.
Not Enough Phoenix Home Buyers
The cycle is going to continue as the supply vs. demand scenario is feeding the trend. According to AZCentral.com, there aren't enough people with the financial resources to buy homes. Some may have the cash, but lack the credit scores and inability to pass tougher mortgage requirements, required to make the grade. Of those who do qualify to purchase homes, many of them are investors who are purchasing the homes to either flip at a future date, or fill with renters now.
Overall, the switch in consumer opinion regarding owning a home is further holding back a recovery in the Phoenix market. According to the most recent American Dream Survey conducted by Trulia.com, one in four renters are showing interest in ever buying a home. Within the city, uncertainty surrounding the home market is contributing to this shift in attitude.
Final Word On Phoenix Housing
Since 2006, the Phoenix homeownership rate has dropped from a healthy 71 percent to a current low of 67 percent. Those still committed to buying are taking advantage of the slew of discounted properties flooding the local market. In the local real estate industry, August sales transactions were marked by 8,790 (45 percent) county auction sales, and combined with the slew of REO sales, foreclosed property sales accounted for 67 percent of Augusts entire home sales. While this is certainly not encouraging to locals in town, those able to buy homes can take advantage of some serious bargains.
