REO & Pre-Foreclosure Real Estate in Greater Phoenix

May 04, 2009

Finding stability.

The key to "stability" and "normalcy" in the market is to remove as much of the distressed property from the supply as possible.

Distressed sales drive prices down and hurt "normal" sellers who often cannot compete against properties which are being sold for below market price. The problem is that the current market price keeps being driven down as distressed sellers compete to capture a smaller number of buyers.

Indeed, distressed properties, particularly those lender owned -foreclosed- properties have been on the decline. We went over the April 2009 home sales a few days ago. Below are the distressed sales statistics: those that are either lender-owned (REO) or short sales.

Pre-Foreclosure	April '09	March '09	April '08	April '07
Active	11,899	12,005	-	-
Pending	1,924	744	175	44
Sold	5,472	4,799	894	92
Inventory	14.8	18.2	-	-
Listing Success	34.50%	29.10%	-	-
REO
Active	7,040	10,379	-	-
Pending	8,501	7,785	-	-
Sold	5,523	5,339	1,523	115
Inventory	1.3	2.1	-	-
Listing Success	85.6%	77.7%	-	-
Median Price	$123,339	$130,000	$185,000	$206,000

Take a look at foreclosed and pre-foreclosed homes for sale in Phoenix and you'll see that the choices have greatly diminished and often buyers need to compete for homes, driving the prices up: this is not a rule though, only the premium homes are selling fastest while homes that need work still sit on the market, and there are many over-priced REO properties and unreasonable asset managers, those not willing to see that the market is in fact soft - particularly - for condos.

There is still a long way to go for stability. What happens when REO's dry up? How will the market react to the higher priced "normal" sales? What about all those short sales that are not selling (34% sell): will they come on the market as foreclosed properties?

In particular sub-markets like Avondale, Glendale, Goodyear, Mesa, Peoria, Phoenix (sub-markets of), Surprise, where starter homes tend to be the bulk of the stock we may have reached some stability. Even with an increase in REO inventory the price point ($150,000 or less) will mean that they will quickly be bought up.

It's the sub-markets like, Scottsdale, Paradise Valley and to some extent Tempe where inventory levels are above what is considered normal, pricing pressure will be strong, driving prices down.

Despite the mixed news and signals we are in an improving market, though still a difficult one for sellers and a very lucrative one for buyers.

(Data is ARMLS via The Cromford Report)

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