What has happened to the housing inventory in Phoenix? Inventory has dropped to an extremely low level. In 2005 when inventory dropped, prices shot through the roof. In January though prices only showed an insignificant increase:
At the beginning of 2011, there were 40,000 single family homes for sale on the Maricopa County Multiple Listing Service, which was way above the 25,000 level considered a healthy market by local realtors. Today, that number, which includes foreclosures and short sales as well as regular listings, has plunged to 13,000 homes listed for sale.
While Miami and Phoenix were the only cities where home prices increased in December over November on the S&P/Case-Shiller Home Price Indices, the gains were minimal, at 0.2 per cent for Miami and 0.8 per cent for Phoenix.
So what is going on? Sales are way up, but not enough to account for all the foreclosures in the pipeline. There has been some debate about the Notice of Trustees sales, (NOTs) homes that are in default for non-payment. Are the lenders not foreclosing? Hanging onto REOs? What is the deal?
We asked long time real estate agent L, who has been active in the Phoenix real estate market for many years what his assessment was. Here told us about a discussion he’d had in his office with other agents:
Notices of Trustees sales are still running at or close to 300 a day. Many of these are purchases that were recorded in 2011 and most are from 2006 or later. Some of them haven’t been lived in since 2007. These were bought by flippers who got caught in the crash.
Where are these NOTs going? Many are being bought at the Trustee’s sale and are being sold via email and are never coming on the MLS. Some are waiting to be or are in the process of being remodeled. (AKA painted, carpeted, and yes, granite counter tops and new bathroom fixtures. Then they add a little landscaping.) We have seen this all before.
We also looked at new listings. Most are houses that are being flipped and resold, then appraised at unreal prices. Consequently we are doing the same thing all over again. This happened before when housing boomed. This process makes the sales look higher as the same house is selling two, sometimes three times. So much for the NAR or ARMLS sales numbers.
Many of these homes never get to the MLS. They are purchased by investors and then marketed by rental management companies as rentals.
A lot of REOs are now being held by Fannie and Freddie and are going to be sold in bulk. It is also true that many lenders are not pushing trustee sales because they are backlogged with so many. Many borrowers haven’t made a payment in years.
We haven’t learned from our mistakes. We are doing the same old thing with false appraisals and lending to flippers. It’s “Déjà vu all over again”…..!
There is currently a lot of activity in the Phoenix market, but it is largely led a “foreclosure-fest” of distressed properties. On average, there is only a three month supply of homes priced at $250K or lower, but more than a 15 month average for homes priced above that level.
And as for those 300 new NOTs a day, they have the potential to bring the market down again:
Last year, the region posted the nation’s sixth-highest metropolitan foreclosure rate, based on foreclosure filings by housing unit, market researcher RealtyTrac says.
As those homes hit the market, they’ll drive home prices lower, says Moody’s analyst Daniel Culbertson. Meanwhile, new single-family home construction will remain “lethargic,” he wrote in the December report.
A “skewed” market is not a “recovered” market, and the current market in Phoenix is skewed in favor of distressed properties and investors. Until the housing market has returned to a more traditional market where foreclosures are the exception to the rule and traditional buyers are the driving force, the market remains unbalanced, with an uncertain future.