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Phoenix Home Sales Fastest in 2 Years

DQNews.com

Phoenix-area homes sold at the fastest pace for any month in two years during May as serious bargain hunters mixed with the more traditional springtime buyers. Subtle changes in the types of homes selling helped nudge the median sale price higher than the prior month for the first time since early 2007, a real estate information service reported.

Distressed sales continued to dominate the market, though at a slightly lower concentration. In May, 64.0% of the houses and condos that resold in the Phoenix region had been foreclosed on in the prior 12 months, down from 65% in April and 66.2 in March, according to MDA DataQuick. The San Diego firm tracks real estate trends nationally via public property records.

A total of 9,562 new and resale houses and condos closed escrow in the combined Maricopa-Pinal counties metropolitan area in May, up 6.1% from April and up 26.0% from a year ago. Total home sales have risen on a year-over-year basis for five consecutive months. However, sales of existing (not new) houses and condos combined have risen on a year-over-year basis for 11 consecutive months, and the May resale total of 8,587 was the highest for any month since June 2006.

Last month's year-over-year gains in house and condo resales offset a year-over-year decline in sales of newly constructed homes, which posted a 51.0% decline. The 975 new homes that builders sold last month marked the lowest new-home tally for a May in more than a decade.

The median price paid last month for all new and resale houses and condos combined was $129,435, up 3.5% from April but down 38.4% from a year ago. The 3.5% month-to-month gain was the first since the median rose 1%, to $256,000, in March 2007, up from $253,500 in February 2007.

Last month's $129,435 overall median was 51.0% below the Phoenix area's peak $264,100 median reached in June 2006. The median has fallen on a year-over-year basis for 28 consecutive months.

The uptick in last month's median sale price from April was, for the most part, the result of deeply discounted post-foreclosure homes accounting for a slightly lower portion of overall sales, as well as a mild decline in the portion of sales occurring below $150,000. Sales of homes priced over $300,000 accounted for a slightly greater share of total sales last month when compared with April. Moreover, last month's sales occurred amid the peak home buying season (spring/summer) and therefore would have reflected an increase in the number of traditional home buyers (not just bargain hunters looking for the deepest discounts). They would include move-up buyers and others searching for the right home in the right neighborhood and, in some cases, a desire to relocate before school starts in the late summer.

An alternative price gauge analysts watch shows a sharp decline from the market's 2006 price peak but, like the straight median sale price, it has also shown milder declines or a flattening trend in recent months: The median paid per square foot for existing single-family (detached) houses was steady at $64 in May, the same as in April, but was down 46.3% from a year ago and down 62.6% from a peak $171 in June 2006.

It's unclear whether this spring's halting of steep month-to-month drops in the median sale price in Phoenix and other Western markets foretells a price plateau. Depending on their severity, ongoing job losses and foreclosures could undermine any trend toward near-term price stability.

Over the past year, and especially over the winter, stronger home sales across much of the West have been driven mainly by bargain hunters. Most are first-time buyers and investors choosing either foreclosure resales or other lower-cost homes in neighborhoods hardest hit by foreclosures. Last month about 45.3% of all Phoenix-area buyers used government-insured FHA loans, a popular choice among first-time buyers. Absentee buyers made up 39.4% of all purchases - a relatively high%age in the West. Absentee buyers include investors, mainly, as well as other buyers whom public records show will have their property tax bills go to an address other than the one for the home they just purchased.

Across the West, year-over-year declines in the median sale price - the point where half of the homes sold for more and half for less - have sometimes overstated the extent to which the value of the typical home has fallen. It's because the median is being tugged lower not just by price depreciation but by shifts in the types of homes selling. For example, more of today's sales involve foreclosures, which tend to sell at a discount and be concentrated in more affordable areas. Also, the August 2007 credit crunch made larger "jumbo" mortgages more expensive and harder to obtain, which has led to sluggish sales - in some cases the lowest in many years - in higher-priced neighborhoods. (A dropoff in high-end sales can pull down the median.)