January 18, 2012
The final numbers on Phoenix-area foreclosures and home prices are in, and they may surprise you. A new report from the W. P. Carey School of Business at Arizona State University shows, despite some positive momentum, 2011’s overall totals failed to show a big improvement from the numbers in 2010.
Total transactions: In 2011, the Phoenix area had 106,850 transactions in the existing-home market. That’s slightly down from 106,975 transactions in 2010.
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Total foreclosures: During 2011, the area had 35,855 foreclosures, not considered to be a huge decrease from 41,625 in 2010.
Rate of foreclosures: The amount of foreclosures as a percentage of overall transactions in 2011 was about 34 percent. That’s down from 39 percent in 2010. (To put this in perspective, in a typical year, foreclosures represent less than 5 percent of the total transactions.)
Median home price: The median price for a single-family home resold in the Phoenix area in 2011 was $125,000. That’s down from $138,000 in 2010.
Median townhome price: The median price for a townhouse/condominium resold in 2011 was $79,000, also down from $88,000 in 2010.
Throughout 2011, the market did experience a significant drop-off in the amount of monthly foreclosures as a percentage of transactions. In January of 2011, that rate was 43 percent, but it dropped all the way down to just under 29 percent in December.
“Although 2011 ended on a slightly more positive note than 2010, there are several issues, including a weak economic recovery and stricter mortgage underwriting guidelines playing a role here,” explains Jay Butler, professor emeritus and the report’s author. “The main question for 2012 is whether homeowner/occupants will play an expanding role. We’re starting to see investors getting very involved again, and many have shifted from buying foreclosed homes to actually attending foreclosure auctions. The number of non-institutional investors with successful bids has moved from about 20 percent all the way up to just over 40 percent.”
All told, about 3 percent of all single-family existing homes in Maricopa County underwent foreclosures in 2011. More than 14 percent of all single-family homes in Maricopa County have been foreclosed on since 2008. Still, Butler emphasizes that many households are simply riding through this.
“While much is focused on the negative aspects of the current market, many homeowners have no real issues or have simply resolved to stay in their current homes,” says Butler. “This does impact buying and selling activity, but it also greatly benefits the expanded remodeling activity in the area.”
For homes that have been resold over the last year, about 40 percent were foreclosed homes sold again with a median price markdown of 14 percent.
Here’s a breakdown of the median home prices for a resold home (not new foreclosures) in each of the past several years:
• 2007 = $260,000
• 2008 = $200,500
• 2009 = $135,000
• 2010 = $138,000
• 2011 = $125,000
Butler says will take years to fully reverse the drop from the peak. He is also quick to caution that it won’t be a straight upward trend, but rather, a back-and-forth dance over the next several years that he calls a “stretched recovery.”
This is expected to be the last report Butler will file as a real estate expert at the W. P. Carey School of Business, though he will remain a professor emeritus at Arizona State University. Butler has been at ASU for about 40 years and has been analyzing the Valley real estate market since 1978.
"Professor Butler actually retired last summer, but he has graciously continued his decades-long analysis of the Valley real estate market while we completed a transition of his work to others,” says Robert Mittelstaedt, W. P. Carey School of Business dean. “Over the years, Jay enriched learning opportunities for thousands of students through his teaching, and he enhanced the knowledge and understanding of real estate markets for all of us. We wish him the best in retirement."
Mike Orr, a well-known Phoenix-area housing analyst and founder of the popular real estate website called The Cromford Report, recently joined the W. P. Carey School of Business as director of the Center for Real Estate Theory and Practice. He will continue to provide regular updates through the school about the Phoenix-area real estate market.
Butler’s final report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Press-Release-December-2011-resale-homes.doc. More analysis is also available from KnowWPC, the business school’s online resource and newsletter, at http://knowwpcarey.com.