This from my Arizona Republic real estate column (permanent link):
The mini-boom we’ve been seeing in the Phoenix real estate market over the last few months may be abating slightly, but, for now at least, snagging a cheap house can take some effort.
Bargain-priced lender-owned homes are generating multiple offers and are selling, ultimately, at above-list prices. Many lenders are handling their short sales as silent auctions, with every offer being forwarded to the bank for evaluation. Buyers are pitted against each other with multiple-counter-offers.
Many of the buyers of lower-priced homes are investors. Some of them are buying homes to fix and flip, but most are newly-minted landlords in search of tenants.
Most of the rest are first-time home-buyers looking to cash in on the $8,000 federal tax credit. These folks are in a tough spot. Without cash for repairs, they can’t compete for the cheapest of the lender-owned homes. And since the homes they buy must appraise for at least the purchase price, they can’t compete against all-cash buyers.
But here’s the irony in this whole scenario: There is no shortage of housing in the Valley. Right now there are about 33,000 residential listings in the MLS system. That’s down from a high of 55,000, but it’s way up from a low of 11,000 at the peak of the boom.
Moreover, there are many thousands of homes in the foreclosure pipeline that have not hit the market yet. For whatever reason, banks are withholding that inventory — perhaps to put a floor under prices. If so, that floor will likely be a durable one, with the steady drip of lender-owned homes keeping prices at around their current levels for years to come.
But moreover yet again, we are still overbuilt. We simply have more kitchens than cooks. If you have to close before November 30th to get your tax credit, you may not see the humor in our situation. But take heart: Investors can only tolerate so much vacancy before they rethink their spending. Rationality will return to the real estate marketplace.
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