In June, more than 40% of the 7,840 home sales in the Phoenix area were purchases of foreclosures, says Arizona State University’s Morrison School of Management. Median price of the foreclosed properties was $169,890, compared to a median price of $218,000.
A year ago, the median price on foreclosures was $225,900; for traditionally marketed houses it was $265,000. Interestingly, foreclosed homes on average are significantly smaller than traditionally marketed houses: 1,665 square feet for foreclosures, vs. 1,865 for the others.
Signs of Activity
These drops in value are stimulating interest among investors and people who want to buy homes to live in them, especially in the downscale part of the market. According to the researchers, buyers expect that prices will rise over the next few years. Although the slump in home values is not good for many homeowners’ pocketbooks-especially in the outlying suburbs hardest hit by the decline-if the government’s efforts to rescue defaulting homeowners take hold, we may see the market start to turn around as demand for now relatively low-priced properties increases.
Here in the Micromarket
In my neighborhood, which as you know is not the greatest but is centrally located, values are holding fairly high despite several foreclosures. Around the corner, there’s a house that was purchased and cherried out magnificently by a speculator during the Late, Great Bubble. The place was very handsome, with new everything, an emerald-green lawn, and an elegant fountain in front. The investor asked something over $400,000 when he sold at the height of the boom.
I don’t know whether the house was in foreclosure when it went back on the market, but it certainly looks like a foreclosure: the lawn is dead, the fountain was ripped out, its raw concrete pad left among the weeds, and the whole atmosphere suggests abandonment.
That house just sold for $340,000, a good price for a place in this aging neighborhood, a block away from a huge, noisy, dirty construction project just getting under way, which will rip out an entire row of homes along the main drag, bring endless chaos, and drag on for at least four years. It’s $108,000 more than I paid for my house, also cherried out and a reasonably safe distance from the pending railroad project.
Houses that are not in foreclosure are, predictably, doing even better: a recent sale on my street brought $395,000. Remember: this is a neighborhood adjoining two menacing slums, where you don’t put your kids in the public school unless they know how to use a knife or a club and you don’t care whether they ever learn to read.
And as for the Investment House…
Down at the M’hijito’s, a place a few doors away just sold for $35,000 more than we paid for our investment scheme. The houses there are all essentially identical, his being one of the area’s first true cookie-cutter neighborhoods.
Location, Location, Location
Evidently how a house’s value fares has to do with where the house stands, especially given the flap over gas prices. Even in less than upscale central-city areas, prices are holding fairly well, relative to what is happening in other parts of the Valley.
If you’re buying, stick to centrally located middle-class or gang-free working-class neighborhoods. Those areas will again boom when the real estate market recovers, especially if gas stays high and cities are forced to build decent public transport systems.