Arizona Foreclosures Hit Record Low Numbers While Property Values Soar

Tim Rocho, owner of the Arizona foreclosure data provider Real Estate Fortune, says recent data indicate significant trends are developing for 2006 as Arizona residential property value appreciation tops in the Nation and Maricopa County foreclosures and mortgage delinquencies continuing to attain historic lows.

Scottsdale Arizona (PRWEB) December 22, 2005 -- According to the OFHEO, Arizona topped the State by State property appreciation list by a “wide margin” with 30% annualized appreciation through the third quarter of 2005. The four quarter appreciation ending September 2005 for the Phoenix-Mesa-Scottsdale also topped the MSA list with 34.4%.

While property values soared, a flood of excited investors poured money into the Valley of the Sun snapping up property inventory at a record pace. This aggressive buying reduced Maricopa County foreclosure inventory from over 9000 properties in the first part of 2002 to about 2500 this month.

Just two years ago in December 2003, 1501 properties in Maricopa County had a Notice of Trust Sale filing. Last month there were only 700 NOTS, accounting for a 50+% reduction in one year.

Even more significant is the amount of properties that actually sold at auction. Two years ago in December 2003, investors had 446 auction (foreclosed) properties to choose from. That number was reduced to a paltry 51 in November, almost a 90% reduction in two years!

But are the dynamics of the market changing again? I believe so. Two years ago MLS inventory was over 26,000 properties. It dipped below 7000 in March of this year, and has been moving up steadily to past levels with more than 24,000 on MLS now. Average days on market has also increased and monthly sales have moved from a high of 18,000 sales in June to a little over 12,500 in November.

The increase in inventory is concurrent with a slowdown in residential resale prices. The median price of a residential resale home in Maricopa County has risen from $182,000 to $259,900 over the past year, but appreciation has slowed dramatically the past three months, even having a slight step backward in October.

Along with that, it looks as though mortgage delinquencies have hit a natural low, and are about to start trending up again. FHA, VA and Sub-Prime late payments look to be creeping up, and conventional loan delinquencies have flattened out.

Did the “Bubble Burst”? I don’t believe there ever was a Bubble (see my article “Bubble Schmubble!”), but there are more sellers than buyers at the current price level.

In fact, out of state buyers have already decreased their buying activity from a peak of more than 25% of all sales (more than 4000 properties per month the second quarter of this year), to about 19.4% (2444) in November. Investor activity however (measured by the rental election on the Affidavit of Value), has remained strong at about 16% of all purchases.

Here’s what I believe the numbers are telling us about foreclosures:

Adjustable rate mortgages, which are about 29% of all loans, will start showing up for adjustments in 2007, and homeowners might not have the ability to pay extra. This will increase delinquencies and foreclosure activity.

A key statistic is that most loans default in the third to the fifth year. Today, about 80% of all mortgages are three years old or less, so 2006 to 2008 will (statistically) see more default activity. Professional investors with the knowledge, skill and contacts with lenders and banks will prosper.

You’ll also have an opportunity to buy part or all of other investor’s portfolios. Prices have risen so high so fast that it’s been tough to find positive cash flow rentals. Folks usually only want to be in the “red” so long, and some just won’t want to be landlords long term.

What’s hot right now? Condo’s and value priced inventory. Since the sub $175,000 market has been taken away, people are buying condo’s because that’s what they can afford.

Finally, as a real estate professional or investor, you know that money can be made in any market: flat, rising or falling. We can make money, but identifying and riding a trend creates wealth. The last four years saw record appreciation. People became multi-millionaires buying property in the right areas from 2001 to 2005.

Will appreciation continue? I think so, but not across the board at the pace we have seen. There are bargains everyday, and savvy investors will continue to do very well into 2006.

One thing’s for certain, people will continue to move to Arizona in record numbers for the weather, lifestyle and economy. This will keep the Arizona real estate industry healthy for the foreseeable future, presenting opportunities for investors that position themselves wisely.

About Real Estate Fortune, llc.

Real Estate Fortune, founded by Tim Rocho, is an Arizona based resource and training company for real estate investors. REF offers a daily foreclosure email service at http://www.refortune.com/data_subscriptions.php Maricopa County data is compiled by Tom Ruff at the Information Market.

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