Market on the Rise
The news is good for the real estate market in Phoenix, and the good news is now starting to come out in the media. Phoenix was one of the hardest hit real estate markets in the country with plummeting values and a record number of foreclosures and short sales. The media is reporting that the housing market in Phoenix is now on the rise and recovering – leading the nation in home value gains. The average price of a home in Phoenix has increased more than 38 percent in the last year and the values are at the highest levels since 2007. The number of jobs in Phoenix (and Arizona) in December 2012 was at the highest levels since December of 2008. In 2012, there were 11,852 permits pulled to build new single-family homes compared to 7,204 in 2011. This increase of 65% adds more new homes that will be available to sell in 2013. Foreclosures are down by 40% – 1,721 in December 2012 compared to 2,867 in December of 2011. Short sales were 27% of total sales in 2011; this declined to 23% in 2012. In addition to all of this good news, interest rates are still at historically low levels.
Some examples of this good news in our own South Mountain Village –a single-family home in a gated community on the mountain with 3,589 square feet, four bedrooms, three and one half bathrooms, three fireplaces, a pool, three-car garage and gourmet kitchen sold for $200,000 in February of 2012. This home has been rented for $1,900 a month and the investor’s payment is $1,250 a month. This home has netted the investor $650 positive cash flow a month and, recently, a comparable but smaller home sold for $299,900 on the same street. In another popular neighborhood, a 2,579-square-foot home with four bedrooms and three bathrooms and a pool sold for $181,000 in July of 2012. The same floor plan down the street sold for $272,000 in December of 2012.
The Wall Street Journal attributes the housing recovery in Arizona to the fact that Arizona is a non-judicial state. Non-judicial states have a simplified process for the lenders to foreclose on homeowners that are delinquent. In a judicial state, the lender has to file a lawsuit which can delay the foreclosure process for many months or even years before settling. Current studies estimate that the foreclosure inventory in judicial states are more than three times that in non-judicial states. This, with the backlog in the courts of these states, is causing it to take significant time for judicial states to flush out their foreclosures and is delaying recovery in most of these states. According to the Wall Street Journal, housing prices stabilize faster when lenders can enforce contracts. The WSJ stated that in Miami, Fla., a judicial state, home prices were up 8.5% compared to 21.7% in Phoenix. In Detroit, Mich., a non-judicial state, home prices have increased 10%, whereas in the judicial state of Illinois, Chicago home prices dropped 1.3%. It has been popular for politicians to promise to make it more difficult for lenders to foreclose on homeowners, however in this WSJ column, it was stated that political intervention on behalf of delinquent borrowers has done more economic harm than good. Judicial states in particular should revert to non-judgmental status before the next housing bust. New Jersey Governor, Chris Christie got the point when he signed a law in December that allows lenders to expedite foreclosures on vacant and abandoned homes. The non-judicial process contributed to the fact that our market recovered as quickly as it has.
It is a great time to sell. With prices on the rise, many homeowners that have wanted to sell and have been sitting on the sidelines because their values were depressed, are now getting in the market. The inventory is low, providing the sellers with little competition to get their homes sold. The Mortgage Forgiveness Act has been extended for any homeowners that are still under water (their home is worth less that they owe) can take advantage of a short sale without tax implications.
For buyers, the interest rates are low. The principal and interest payment of a $100,000 home on a 30-year loan with 3.5% down payment at 3.5% interest will run $433.33 a month. The same terms for a $200,000 home would be $866.66 a month and a $300,000 house would be $1,299.98 a month. Those are payments that make it a no-brainer for a buyer to get into the market.
Our housing market is now fully in the recovery stage and the media is now reporting this progress. We are fortunate to be in an area that is recovering – the real estate market is finally looking solid again in the Valley of the Sun. If you have been waiting to sell or buy, talk to your real estate agent and make your move.