Study: Foreclosures 44% of Valley home sales

The latest single-family housing resale numbers for the metro Phoenix area show an increase in foreclosure activity when measured as a percentage of total resales.

According to the Realty Studies department at Arizona State University, foreclosure sales represented 44 percent of total resale transactions in the region during August, up slightly from 42 percent in July and far higher than 20 percent in August 2007.

SEARCH VALLEY FORECLOSURES

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Foreclosed transactions represent home owners losing their property to the lender or successful individual bidders.

The data indicate the local housing market may still have not hit the bottom, although the federal government's takeover of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. is resulting in lower mortgage rates, said Jay Butler, director of Realty Studies at ASU's Polytechnic campus in east Mesa.

"Most potential buyers still confront a weak economy, slumping levels of confidence and tighter underwriting guidelines," Butler said. "Thus, the local housing market still contains considerable uncertainty over when any potential strengthening can be expected."

Of the total of 7,505 recorded home resale transaction in the region in August, 3,295 were foreclosure transactions, Butler said. In July it was 3,470 out of a total of 8,165. Thus the actual number of foreclosures dropped in August, but the total number of transactions also dropped.

Butler said it's not unusual for the number of housing resales to drop in August because July typically is the end of the resale season. Historically, the remaining months of the year post slower recorded activity, he said.

Foreclosure activity differed widely among Valley cities. For example, only 23 percent of Tempe resales in August were foreclosures, but in Avondale the percentage was 56 percent and in Mesa 41 percent, Butler said.

He added the lower prices are starting to fuel interest in buying by investors, who are betting that prices will rise in the next few years, he said.

Interest is especially high in the lower-priced ranges because more capital is available for lower-priced housing, he said.

For the traditional market, the Valley's median price was $193,550 in August while the foreclosed properties had a median price of $161,875. A year ago the median prices were $258,000 and $220,010 respectively.

But median prices varied widely depending on location. In North Scottsdale, the median price in August for a foreclosed property was $545,000, while the traditional market was $525,000. In South Scottsdale the splits were $219,855 and $242,000, respectively. In Maryvale, traditional transactions were $98,000 and foreclosures were $123,580.

While lower prices are improving affordability for buyers, they are having an adverse impact on potential sellers who are watching their limited equity erode, Butler said.

"Thus lower prices affect the ability and desire to continue owning the home and even overall confidence in the economy, which put additional strain on the local housing market," he said.

Although the numbers during the past year don't look encouraging, the actual percentage of homes in foreclosure sales is not much greater than the national average, said Serdar Bankaci, founder of Default Research, a company that collects real estate date in the Phoenix area.

"If you look at the whole picture, the region had 2.86 percent of residents enter foreclosure, and that is not too far off the national average of just above two percent," he said.

He expects foreclosure rates to start declining in the next few months.

"Arizona and particularly the Phoenix metro region have a strong base for their economy," said Bankaci. "With government spending on tourism, education and construction in the billions, this region will recover and home prices will recover."