This is my column for this week from the Arizona Republic (permanent link).
If you have cash or can qualify for a mortgage, this could be the ideal time to grab a bargain-priced home in the Phoenix area
The Phoenix area is hosting a wave of real estate investors like we haven’t seen since 2005. Unlike the novices who came here during the boom, these are experienced landlords. They’re here now because lender-owned homes are selling for bargain-basement prices.
They’re not alone. Savvy home-buyers are scooping up bargains, too, especially first-time homeowners. Interest rates are still attractive — even if the homes themselves are less appealing.
Interestingly, over the last couple of weeks, many of the lowest priced homes have seemed to evaporate. I’m guessing that October is going to be a banner month for closed transactions. Yes, most of these will be foreclosed homes, but buyers are performing the liquidator function, restoring the value of underperforming assets.
With so many homes selling, are we nearing a bottom in the Phoenix market? It’s plausible, if the number of sales meets or exceeds the number of newly-listed homes to be sold. But, even now, around 7,500 homes a month are entering the foreclosure process.
It could be a long time before that inventory is absorbed. And if it comes onto the market faster than buyers can snap it up, prices will continue to decline.
Visualize the real estate market as a pipeline. The home that gets a foreclosure notice today won’t hit the lender-owned market for three to six months. Are there enough investors and other buyers to snap up record numbers of homes, month-after-month, for the next two years — or longer?
The answer to that question is yes — if the price is right. If the demand for low-priced homes already exceeds the supply in the pipeline, prices will stabilize or even start to rise. If not, lenders will be forced to cut prices until buyers find them impossible to resist.
It’s an awful time if you have lost your home, and it’s not great if you are living in a home you cannot sell profitably. But if you have cash or can qualify for a mortgage, this is an ideal time to snag a bargain-priced home in Phoenix.
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Nigel Clarke says:
Much of what you’re saying has been happening in my own market in Northern Virginia recently. The number of foreclosed homes coming on the market has dropped over the last six months while the number of sales in the last three months has risen as the affordability of homes has reached a point that buyers are comfortable with. DPA program’s have driven the mid range market and the low end has been sucked up by investors buying in the $80-150K range. Inventory is down to 3.5 months. I’m expecting a new flood of foreclosures to hit th local market in around 90-120 days despite short sales becoming easier as banks are mandated to work out more loans.
Nigel
October 11, 2008 — 7:25 am
Robert Kerr says:
Inventory is down to 3.5 months
Nigel, where do you see that? I see 5.5K inventory, 900 per month. That’s 6 mos. in Prince William County, not 3.5.
October 11, 2008 — 10:55 am
Nigel Clarke says:
I work the western end of the county plus Manassas City and Manassas Park. In that area the inventory has dropped dramatically.
I work a restricted area not wishing to pass out of my area of expertise. I see no point in trying to work an area that is more than 20-25 minutes across when it is so densely populated.
It’s just not possible to have a detailed knowledge of the market if your market area is too large.
Nigel
October 11, 2008 — 6:48 pm
Brian Brady says:
This last exchange is interesting and supports one of the better read articles I’ve read:
http://www.themortgagereports.com/2007/09/why-real-estate.html
October 12, 2008 — 10:43 am