I was talking with an investor client that had purchased a few homes through me in the past. He had heard that inventory was rising in the Phoenix metro area and he wanted to know if prices had dropped and if it would be possible to get a “good deal with a decent rate of return” on another investment home purchase in Phoenix.
I knew that this would be a complex question to answer knowing that he had purchased 2 short sale listed single family homes in Gilbert in late 2011 when the market price was significantly lower; one with 3 bedrooms + loft, 2.5 baths, 1816 square feet for $110,000 and another with 4 bedrooms, 2.5 baths, 1940 sq ft for 121,700, he was getting close to a 10% return on his previous investment purchases, and that his expectation would be the same. My response was “Yes, while it is true that inventory has risen a bit in the past few months in the Phoenix metro area overall, we are not seeing significant drops in prices like we saw during the post boom period when you bought before (yet). Personally, I did not think that prices will drop to the ‘smoking deal’ level you previously purchased your homes for in the 85295 and 85296 zip codes in Gilbert ever again…that ship had pretty much sailed.” I then said, “I do not have a crystal ball and I am not able to predict what the market will do in the future, but let me try to substantiate this claim with data I can obtain today from the Arizona Regional Multiple Listing System (ARMLS)”.
Without using any search criteria such as square footage, number of bedrooms, number of bathrooms, private pool, etc, there are a total of 371 active single family listings in Gilbert’s 85295 and 85296 zip codes with a square footage range of 1024 – 7978 square feet priced from $149,899 – $999,000. Of the 371 active listings if we limit it to “distressed” listings; short sales, previously approved short sales, bank/lender owned/REO or HUD listings the number shrinks significantly to 42 active listings with a square footage range of 1314 – 5300 sq feet priced from $150,990 – $635,000. If I narrow it down a little further and add a minimum of 1800 square feet, 3 bedrooms, and 2 baths the number drops to 28 active listings with a square footage range of 1817 – 5300 sq feet priced from $185,000 – $635,000. Only 1 of them priced under $200,000.
Since this information is specific to 2 zip codes in Gilbert I pulled some additional foreclosure data from Michael Orr, Director of the Center for Real Estate Theory and Practice at WP Carey School of Business at Arizona State University’s latest report as well:
- Distressed supply was down 28% from 12 months ago.
- Foreclosure starts on single family and condo homes dropped another 17% between August and September and were down 61% from September 2012.
- Recorded trustee deeds (completed foreclosures) on single family and condo homes were down 5% between August and September and down 63% from September 2012.
Single family home sales fell year on year for all other sectors:
- Investor flips (down 10%)
- Short sales and pre-foreclosures (down 67%)
- Bank owned homes (down 37%)
- GSE (Fannie Mae, Freddie Mac, etc.) owned homes (down 45%)
- HUD sales (down 41%)
- Third party purchases at trustee sale (down 68%)
If you need additional information, feel free to give me a call, send me a text, or send me an e-mail.