Foreclosures still hurting resale market

August 20, 2008 - 8:53PM
Edward Gately, Tribune

Foreclosures continued pushing down resale home prices across the Valley last month, with Scottsdale's median price falling below $500,000 for the first time since 2005.

For the traditional sales market, the Valley median price was $200,750, while the foreclosed properties had a median price of $159,205, according to the latest Arizona State University report. That compares with $218,000 and $169,890 last month, and $270,000 and $220,075 in July 2007.

Foreclosure activity represented 3,470, or 42 percent, of the 8,165 transactions that took place last month. Foreclosed transactions are homeowners losing their property to successful individual bidders or the lender of record.

The median price, including foreclosures, in Scottsdale was $450,000, compared to $501,135 in June and $595,500 in July 2007. The prevalence of foreclosures is hurting the market, said Janine Brown, president of the Scottsdale Area Association of Realtors and a real estate agent with John Hall & Associates.

"I don't think that we have seen that type of number for a while," she said. "Even with the tick back in our median price, we had a huge tip up in 2005. It's kind of hard if you have a really nice house and you want $250,000 for it and the guy next door let his go on short sale for $175,000. That's going to affect your home price."

Foreclosures are negatively affecting Scottsdale, and not just through lower home values, she said.

"If you go in and you've got a house that's in foreclosure or bank owned, and the bank's not maintaining the property, that affects your entire neighborhood," Brown said.

The Scottsdale market is gradually showing improvement with more first-time homebuyer activity in central and south Scottsdale, she said.

"And once that market gets a good upward tick, it starts to move the other markets because if you can sell your house for $250,000, it's real possible your next one might be $300,000, and if you can sell your $325,000 house, your next one might be $400,000," she said.

Home prices are being impacted by the large number of vacant homes, said Jay Butler, director of realty studies at ASU's Morrison School of Management and Agribusiness at the Polytechnic campus.

"We keep adding to the (foreclosure) inventory," he said. "The uncertainty of the economy and other things just make buyers reluctant to make any commitment and even those who are willing to make the commitment, tightening underwriting guidelines make it more difficult to borrow."

While foreclosures are hurting the market, one encouraging sign is more buyers are showing an interest because prices have come so far down, said Alicia Conley, a real estate agent at Royalty Real Estate Services in Mesa. Her territories include Chandler, Ahwatukee Foothills and Maricopa.

"It's really nice to see some of the things that were going on in a more neutral market starting up," she said. "You're starting to see people hold open houses. When's the last time you saw an open house sign? Those things are happening."