Home > Blogs > Craig Schaid's Blog

Craig Schaid's Blog

By Craig Schaid | Agent in Pike Road, AL
  • Record-High Investor and All-Cash Purchases Lifted Phoenix-Area February Home Sales

    Posted Under: Market Conditions in Phoenix, Agent2Agent in Phoenix  |  April 5, 2011 1:43 PM  |  868 views  |  No comments
    A record-high portion of investor and all-cash purchases lifted Phoenix- area February home sales to a four-year high for that month. The median sale price dropped year-over-year for the eighth consecutive month as sales of existing homes priced below $100,000 remained strong and sales of newly built homes, which are typically more expensive, held at a record-low, a real estate information service reported.

    A total of 7,248 new and resale houses and condos closed escrow last month in the combined Maricopa-Pinal counties metropolitan area. That was up 5.5 percent from the month before and up 6.2 percent from a year earlier, according to DataQuick Information Systems of San Diego, which tracks real estate trends nationally via public property records.

    A rise in sales from January to February is normal for the season. On average, Phoenix-area sales have increased 9.2 percent between those two months since 1994, when DataQuick's complete Phoenix region statistics begin. Sales have increased year-over-year for the past two months.

    Last month's sales were the highest for a February since 8,940 sold in February 2007. But last month's tally still fell 9.7 percent short of the average number of sales for the month of February since 1994. Last month's sales of new homes were the lowest on record for a February.

    Sales below $100,000 represented 40.4 percent of all transactions last month - about the same as in January and the highest level since the housing downturn began. A year ago 31.6 percent of all homes sold for less than $100,000.

    People paying cash bought just over two-thirds of the sub-$100,000 homes sold last month.

    For the overall market, cash buyers accounted for a record 48.0 percent of all sales last month, up from 46.0 percent in January and 43.9 percent a year earlier. They paid a median $89,000, the same as in January but down 15.2 percent from $105,000 a year earlier. Specifically, these were transactions where there was no indication of a purchase loan recorded at the time of sale. Some of these "cash" buyers could have used alternative financing arrangements outside of a typical, recorded purchase mortgage, and in some cases they might take out mortgages after their purchases.

    About 62 percent of last month's cash buyers have mailing addresses (for their property tax bills) in Arizona, while about 5 percent are based in California and the balance - 33 percent - are based in other states or countries, according to an analysis of public records data. For all sales (whether cash or financed), about 75 percent of last month's buyers were based in Arizona, while 4 percent were from California and 21 percent were from other states or countries.

    The number of Phoenix-area homes purchased with cash last month rose to 3,476 - the highest for any month since December 2010 and the highest for any February since at least 1994.

    Conversely, the number of home purchases that were financed with a mortgage fell last month to 3,772 - the lowest for a February since 2009, when 3,709 homes were purchased with mortgages. Last month's financed purchases represented 52.0 percent of all sales, which is the lowest for any month in DataQuick's records back to 1994.

    The unusually high level of cash buyers reflects a combination of factors: Tighter lending standards that force some investors and other buyers to pay cash if they're able; cash buyers' ability to move to the head of the line with sellers when there are multiple offers (sellers like the speed and certainty of cash deals); a preference among some to invest their cash in real estate as opposed to competing investments; retirees or those close to retirement who downsize, selling a more expensive property and paying cash for the retirement home.

    At the same time, the relatively low level of homes bought with a mortgage reflects high unemployment; potential buyers' concerns over job security; the inability of many to sell their homes for enough to pay off their mortgage and buy another home; and today's relatively tight lending environment, which shuts out some potential buyers.

    The government's recent changes to qualifying standards for FHA mortgages, along with lenders' own requirements for these government- insured loans, are likely contributors to the gradual decline in the portion of buyers using low-down-payment FHA mortgages. Last month FHA loans represented 33.8 percent of all purchase loans used in the Phoenix region, down from 35.3 percent in January and 41.3 percent a year ago. Last month's figure was the lowest since it was 32.5 percent in April 2008. The peak month for FHA loans was 55.3 percent in September 2008.

    Last month absentee buyers, who are mainly investors, purchased 46.1 percent of all Phoenix-area homes sold - the highest level in more than a decade (this particular statistic goes back to 2000). Last month's absentee level was up from 45.1 percent in January and 41.2 percent a year earlier. Absentee buyers, who paid a median $97,000 last month, can include second- home purchasers and others who indicate at the time of sale that the property tax bill will go to a different address.

    In the overall Phoenix market last month, buyers paid a median $120,000 for all new and resale houses and condos that closed escrow. That was down 0.8 percent from the month before and down 11.1 percent from a year earlier. The median has fallen on a year-over-year basis for eight consecutive months.

    The Phoenix area's February median was 14.2 percent below the highest median over the past year -$139,900 last June - and it stood 54.6 percent lower than the all-time peak of $264,100 in June 2006.

    Another key price gauge analysts watch, the median price paid per square foot for existing single-family detached houses, held at $65 last month, the same as in January but down 11.0 percent from a year earlier. It was the sixth consecutive month in which the median paid per square foot dipped year-over-year. February's figure stood 62.0 percent below the $171 peak in May and June of 2006.

    Distressed property sales - the combination of sales of foreclosed homes and "short sales" - continued to play a huge role in the Phoenix market.

    Last month foreclosure resales, defined as homes that had been foreclosed on in the prior 12 months, represented 52.4 percent of the Phoenix-area resale market, down from 54.5 percent in January but up from 51.3 percent a year ago. The peak level for foreclosure resales - 66.2 percent - was in March 2009.

    Short sales - transactions where the sale price fell short of what was owed on the property - made up an estimated 12.7 percent of Phoenix-area sales last month. That was down a tad from an estimated 12.9 percent in January and 13.5 percent a year earlier. Two years ago the estimate was 7.9 percent.

    Foreclosures rose sharply last month. Lenders foreclosed on 5,932 house and condo units in the two-county Phoenix area in February, up 17.5 percent from January and up 28.3 percent from a year earlier. During the first two months of this year foreclosures are up 14.8 percent from the same period last year. The foreclosure figures are based on the number of Trustees Deeds filed with county recorder offices. The document signals that a home was lost to foreclosure.

    The foreclosure totals can include units that the county assessor has designated as condos, but are currently used as apartments (e.g. a 100-unit complex designated as condos but used as apartments could be foreclosed on and those units would be reflected in the foreclosure total for that month). For this reason and others, the number of homes foreclosed on has seesawed, and a single month's increase or decline doesn't necessarily indicate the beginning of a lasting trend. In February this year, for example, most of the increase in foreclosures from January can be attributed to the foreclosure of several large complexes where the units were designated as condos.

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer