Gilbert sees boom, bust in housing sales - East Valley Tribune: Gilbert

Gilbert sees boom, bust in housing sales

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Posted: Friday, July 3, 2009 9:50 pm | Updated: 2:59 am, Sat Oct 8, 2011.

Bert Brinton and his neighbors have been lucky.

Brinton lives near the southeast corner of Guadalupe and Recker roads in Gilbert - an area hit hard by bank foreclosures after the housing market imploded. Still, when Brinton tends to the plants in his yard - as he was on a muggy, overcast Wednesday afternoon - he mostly sees the same neighbors along his street coming and going.

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"There weren't too many sales during the boom," he said, standing in his front yard. "So, I don't think too many people had problems with their homes."

Brinton said he was the fourth person to buy a home in the immediate neighborhood 12 years ago.

"Our market value is relative to what it was before the boom, so we're not concerned," he said.

The situation in Jim Pappas' nearby neighborhood was much different.

Pappas, who lives in the Town Meadows community at the northwest corner of Guadalupe and Recker, stood in his front yard pointing to homes for sale that were on the market when he moved in a year ago.

"I haven't seen any change at all," he said.

Some of the houses are now for rent, including the one Pappas lives in. He said he lost his equity by the time he sold a different home, and he's starting over by saving up for a new down payment.

The East Valley's existing home market is improving in some ways but not in others. In terms of inventory, houses are selling and inventory is down.

That's not surprising to Matt Deaton, a real estate agent for Ashby Realty Group who was showing a client a home at Recker and Guadalupe.

"Homes are definitely flying off the shelf," he said, adding that a home he showed in Highland Ranch at Superstition Springs, which was on the market for only 19 days, already had an offer.

"They'll probably make 50 grand or something," he said.

Still, analysts are anticipating another wave of foreclosures in the coming months.

Existing home inventories are down substantially from Jan. 1 in Chandler, Gilbert, Mesa and Queen Creek/San Tan Valley, according to the Cromford Report, which tracks the history and current status of the Valley's residential resale market.

"The buying interest is intense for homes under $350,000," said Mike Orr, owner of Cromford Associates LLC. "This is where most of the sales are. Above $500,000, there is still far too much supply and prices are still falling."

Prices have dropped significantly and continue to drop in outlying areas, while more centrally located areas of the south East Valley have seen some stabilizing, said Jay Butler, director of Arizona State University's Realty Studies Department.

Any sort of real recovery, however, is still years away, he said.

"If you want to look at the traditional segment of the market, which is the owner-occupant selling their home and the owner-occupant buying their home, that segment has remained relatively flat for a while," Butler said. "For me, recovery is when you go back to where the traditional owner-occupant is the dominant element of the market, not foreclosures and investors."


Foreclosures encompass only a small percentage of the East Valley's existing home inventory, but represent a large chunk of the sales, Orr said.

"Being priced lower than most other homes, they sell fast and do not tend to stay active very long," he said. "In contrast, normal listings and short-sales are a much larger proportion of inventory, but a smaller portion of sales."

In May, bank-owned homes represented 44 percent of sales in Chandler, 51 percent in Gilbert, 57 percent in Mesa and 61 percent in Queen Creek/San Tan Valley.

"Competition among buyers for (bank-owned homes) is fierce, and most get multiple offers," Orr said.

David Donaldson, a real estate agent with Keller Williams Realty East Valley, said of the 20 houses he's sold this year, including nearly 10 last month, only one was a traditional transaction."The rest were either a short-sale, a pre-foreclosure or a bank-owned property, and that's the market," he said.

The East Valley's foreclosure crisis began in outlying areas like Johnson Ranch in the San Tan Valley where people were flocking to buy new homes from 2003 to 2005 and became victims of predatory lending, Donaldson said.

"If you look at the established areas of Gilbert and Mesa, they are now having trouble, but that's been more of the trickle-down effect of everything bottoming out," he said. "You will always see the majority of the sales in those newer neighborhoods for the foreseeable future because there's still a lot of properties that the banks have that they haven't even released for sale yet."

The rapid sale of foreclosures is no indication that the existing home market is improving, Butler said.

"It's really not any different than the hypermarket that we were in," he said. "It's not being driven by traditional forces, which is a household buying a residence. So force-wise, it's not really any different than the disaster we went through."

No real improvement is taking place because many owner-occupants still are losing their homes, and a lot of owner-occupants are staying put instead of putting their homes on the market and buying move-up homes, Butler said.


While prices are taking a slight uptick, analysts say it's nothing to get excited about because prices fell so far.

Existing home prices across the East Valley rose late last month after bottoming out in previous months, Orr said. As of June 25, average home prices increased nearly 5 percent in Chandler after bottoming out in late April. In Gilbert, prices rose .7 percent after reaching a low point early last month.

In Mesa, prices increased 5.2 percent after hitting bottom in mid-April, and in Queen Creek/San Tan Valley, prices are up 5.2 percent after hitting bottom in mid-March.

"Gilbert has yet to show a significant increase in pricing, but has been moving sideways in recent weeks," Orr said. "The upward trend has existed in (Queen Creek/San Tan Valley) for the longest time, but is more gradual."

Expensive homes are still falling in price, he said.

"It is the extremely low pricing which is fueling a lot of the buying interest, coupled with the $8,000 tax credit for first-time homebuyers and low mortgage interest rates," Orr said. "The main impediment holding sales back is the difficulty many buyers have in qualifying for a loan."

While homes may be selling quickly and multiple offers bring higher prices, neither mean any real improvement in pricing, Donaldson said.

"In some areas that were oversaturated with homes ... where all the new builds were and all the foreclosures were taking place and the short-sales, they're pricing them low to generate a buzz. The people flock and give four, five or six offers on them and drive up the price to the highest and best," he said.

"Still, some of these homes you're getting for $55 to $75 per square foot. That is like a free house. You can't build homes for some of these prices. We're talking about a 3,000-square-foot house for $150,000, and the house is less than 5 years old, it has a pool and they have $30,000 to $50,000 in upgrades in the house and the backyard."

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