by Dru Bloomfield on March 29, 2009
I’ve been talking to lots of people lately. Meeting new folks, who are not necessarily in real estate and get their information from the news, mostly.
And, once they find out I’m in real estate, they offer condolences and then start pumping me for information. People do love real estate, and they do love a great story.
My perspective has been that Scottsdale sales have been lagging the rest of the valley because prices have not dropped enough. I also believe that home prices in other parts of the Phoenix metropolitan area have dropped too far. When a property gets 10 offers in a week, or another property sells for 25% over listing price, and agents are begging you to call them if it “falls out”, you get the sense that maybe the bottom of the market (related to pricing) may be close. Maybe not in Scottsdale (or Tempe) yet, but definitely there are signs in other parts of the valley.
One of the other trends that I’m seeing is that “flippers” are back. I made this comment the other day, and the person responded with “They started this problem.” My response was that “they” are filling a very important need right now. When I go into a property that a bank has asked me to list, I never know what I will find. Either the home will be vacant, or not. If it’s vacant, it may be immaculate, or it may be totally trashed. And if it’s totally trashed, there’s a good chance that all the kitchen appliance have been ripped out, including the kitchen sink. The bathroom may be in the same condition. The light fixtures and fans may have been pulled out too. These homes need some serious rehab, and investors who will go in and restore them to a livable condition are going to be part of the solution.
On the other hand, I’m finding many more of the lender owned homes that have been taken care of. A couple have been in meticulous condition, with the occupants even cleaning the carpet before they leave. For me, these are the heart breakers. Someone who loved their home, took care of it, and life happened. Got laid off, lost their retirement income, got sick, took a pay cut to keep their job, and more.
Most of us can’t tell the future. Some are forecasting a real estate recovery later this year, next year, and maybe even longer. What I see is that there is opportunity and strife at every bend in the road. Lender owned homes dominate the market in many (most?) areas of the valley. In Scottsdale, we see more short sales, which can be the precursor to foreclosure, depending on the situation. For now (and always), the market is, what the market is.
Cash and FHA loans are the primary means that buyers are using to purchase homes. Investors and many first-time home buyers. People are still moving to the Phoenix area. Our job market is stronger than most. Some are looking ahead to retirement, thinking that now is a good time to buy a second home to retire to in 5-10 years.
As I said, opportunity and strife exist. At all times, in all markets. We have many more challenges to overcome to get to a more balanced market, but I can tell you that there are many who are on not waiting around for that to happen.
The numbers tell the story:
Number of active home listings is down 20% from a high in October, 2007 and down 15% from this time last year. Pending sales are up. Prices are down.
After the stagnation that we experienced in the real estate market over the past couple of years, I’d say that this increased activity is a sign of improvement. Would you?
by Dru Bloomfield on March 9, 2009
photo credit: Dru Bloomfield – At Home in Scottsdale
I’ve been pretty quiet on the blog-front this past month and a half. However, it’s been six weeks of massive action, and an introduction to the world of bank-owned (REO) properties, where the majority of home buying and selling appears to be occurring in the Phoenix metropolitan real estate market.
Last year, most of my business was in Scottsdale. In the past, I’ve worked in a much broader area, and this year will be similar. I currently have homes listed all over the Valley of the Sun, and about 75% of them are foreclosures, priced at $200,000 and under.
Our market has changed, and, in my opinion, Scottsdale is out of sync. Granted, it’s a unique city, land-locked, with many beautiful homes. Foreclosures are few and far between. Short sales are becoming much more common. However, as a whole, it’s not a moving market.
While home sales demand is increasing in Phoenix, Glendale, Mesa, and Goodyear, in Scottsdale it’s decreasing.
Click for full-size view of Scottsdale real estate supply demand graph
And, supply, or the number of homes on the market, is increasing.
Click for full-size view of Scottsdale real estate supply index graph
And when you look at the appreciation rates, comparing the City of Phoenix with Scottsdale, you can see that Scottsdale has experienced a much lower rate of depreciation, appearing to bottom out at about 20%. In Phoenix, the depreciation is much greater hovering at 40%.
Click chart for full-size view of Scottsdale vs. Phoenix Home Appreciation / Depreciation Rates
So, I’ve been pondering the reason that Scottsdale is experiencing a different real estate market. Do you think it’s because:
- Fewer number of foreclosures in the city, and many buyers are only looking at bank-owned properties, thinking they will get a better deal.
- Reluctance of Scottsdale home sellers to reduce home listing prices to incent on-the-fence buyers to make a buying decision.
- First time home buyers are looking to other communities where they can buy a larger and newer house for the same price.
- A trend towards smaller is better.
- Challenges in getting a jumbo loan (greater than $417K)
- General uncertainty and conservatism in spending.
I’m curious. What do you think?
by Dru Bloomfield on December 16, 2008
Source: www.cromfordreport.com
A quick update on the short sale and foreclosure situation in Scottsdale, courtesy of the
Cromford Report. Compared to the rest of the Phoenix area, Scottsdale is in good shape. For instance, the Distress Index for Chandler is in the red zone at 49.3, and Phoenix is clocking in at 69.7. The only city that I’ve found so far that is running in the green zone is Paradise Valley.
This chart illustrates two important points about short sales and foreclosures.
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The percentage of distressed properties on the market in Scottsdale encompass about 20% of the market, but comprise almost 50% of the sales.
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Both listing and sales prices of short sales and foreclosures are significantly lower than normal properties listed for sale. In this chart, distressed properties are listed and selling at approximately 60% of normal homes.
There is an important caveat to note for this second point. Many of these distressed homes are trashed. Appliances removed. Wiring, plumbing, and HVAC equipment can be missing too. Not all homes are like this, but I do speculate that there is a growing market for investors who have the experience and resources to buy, fix, and sell some of these abandoned and abused homes.
For now, many people are looking specifically at short sales and foreclosures to find a good deal, and weather the current real estate market. Opportunities do exist, just bear in mind that it takes some leg work, and a good amount of research to make sure you are buying a diamond in the rough, and not a lemon.
