In October, homebuyers paid a median $128,722 for new and resale houses and condos that closed escrow in the Phoenix metro area; that's down 51.3 percent from the peak $264,100 median reached in June 2006. It was the fourth month in a row in which the median fell on a year-over-year basis.
The low price is making home prices more affordable for twenty-somethings and other first-time buyers, says Tanya Marchiol, owner and broker of Team Investments.
The November Arizona State University-Repeat Sales Index shows a year-over-year decrease in home prices for the third month in a row. The new dip follows a year of relative stability and may get worse, say its authors.
"Since the housing market is entering what historically has been the slowest time of the year for sales, it is likely that declines on a year-to-year basis will continue for at least the next several months," said report co-author Professor Karl Guntermann, the Fred E. Taylor Professor of Real Estate at the W.P. Carey School of Business at Arizona State University.
Foreclosures accounted for over half of the resale market, according to MDA DataQuick of San Diego, which tracks real estate trends nationally via public property records.
"The flow of foreclosures into the market is not likely to end soon, so the added demand associated with job creation and the eventual increase in people moving to the Phoenix area may minimize the downward pressure on house prices going into 2011," said Guntermann.
Foreclosure resales, defined as homes that had been foreclosed on in the prior 12 months, represented 53.2 percent of all homes that resold in September – the highest level since October last year, when it was 53.7 percent. The September figure was up from 49.7 percent in August but down from 56.5 percent in September 2009 and well below the peak level for foreclosure resales – 66.2 percent – in March 2009.
Investors, including many paying with cash, and first-time buyers continue to snap up many of the foreclosed properties on the market.
Marichol says that 20-year-olds are buying single-family homes out in Scottsdale for the price that age group was spending on small Phoenix condos five to 10 years ago.
First-time buyers remain a huge force in the market. In September, 41.9 percent of all Phoenix-area home purchase loans were low-down-payment, government-insured FHA mortgages, a popular choice for first-time buyers. That was up from 38.3 percent in August but down from 43.6 percent a year earlier.
Some first-timers, like other buyers, backed away from purchases after the expiration of the $8,000 tax credit, but they shouldn't have, explains Marchiol.
"Many first-time buyers who feel they are getting the short end of the stick because now they can't used the $8,000 tax credit are not realizing that since prices are lower now, they are better off now than they were eight or nine months ago.
"Homes cost less now than the amount of that deduction," explains Marichol. "Interest rates then were 5.25 percent and now they are around 4 percent. We try to do calls and educate buyers that, because even though there was this huge incentive, you are actually getting a better deal now than you were in January. Our biggest thing, really, is educating. People don't realize what is going on. We really are creating future millionaires if people buy now."
Pictured below are three of her listings of the kind that tend to appeal to young buyers these days. The four-bedroom homes priced between $125,000 to $140,000, range between 1,600 to 2,200 square feet. They are all built after 2000.
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