Fewer Phoenix Foreclosures, But They Still Pack a Wallop
Dawn Yazzie-Howard just went under contract with her 3-bedroom, 2-bath home in Mesa, Ariz., after eight months on the market. The news is bittersweet. She had to part with it as a short sale because she and her husband Nevell owe more on it than it is worth.
At one point the 1,899-square-footer was on the market for $164,900. It was listed for $130,900 when an offer came in. Yazzie-Howard bought the home for $272,000 in August 2006.
But it gets worse.
She has been waiting for bank approval for three-and-a-half months. Although Bank of America, the first lien holder, gave approval for a figure, Aurora Loan Services, the second lien holder, hasn't made up its mind. The hope is that the buyer will not walk away before it does. After all, there are a lot of great properties available in the area and the home values are only declining.
The median price for the traditional market in March was $125,000, which is a slight decline from foreclosure prices fell from last year's $158,175 to $135,600 in March 2011, according to a new report.
"While lower prices can greatly improve affordability, they can adversely impact many owners and potential sellers whom are watching their limited equity erode, as prices decline to and even below existing debt level," says Jay Butler, an associate professor at the W. P. Carey School of Business at Arizona State University who authors the monthly report on the area's foreclosure market.
"A decision to do a short sale was really heartbreaking to be honest," says Yazzie-Howard. "We talked about selling the house for a year. We had looked at home loan modification, but that was a dead end for us. We do want to stay in our house, within the school district," says this mom of three, who also had hopes of one day building their dream home on an empty lot the family also owns. But all of their dreams were shattered when they learned they were upside-down on their mortgage.
"We didn't know how upside-down we were until we bit the bullet to put it on the market. As the months went by, it was awful. It was painful. Every month we had to constantly make the decision to drop the price lower and lower. It will probably take us 20-plus years to make up the value."
Now that they are under contract and close to closing, it is even more stressful, she says. "We are disenfranchised with the banks and how uncooperative they are. The red tape is a big hurdle. All we can do is have faith and hope and pray that it works."
Yazzie-Howard's Realtor, Kris Anderson of Your Premier Team at Re/Max Excalibur, says, "I would say 92 percent of our market are people who are looking to buy under $100,000. The majority of them are foreign national buyers coming in from Canada and South Africa."
Anderson, who has been on the go showing properties all morning before breaking just after lunch to speak with me via phone, says three of her buyers are willing to go as high as $150,000. They know they can get deals in the area, so why pay more.
"A lot of sellers are looking to hold and turn it into a rental. A lot of distressed people here need a place to go to rent."
Although home buyers and sellers are aware that housing prices are heavily influenced by foreclosure-related activity, Butler points out that it's not just that initial foreclosure price affecting the market. "Another influence is that, for the last year, approximately 40 percent of the traditional sales were foreclosed homes that were sold again with a median price markdown of 14 percent from the foreclosed price."
That's not so good news for investors who are looking to buy low by snagging a foreclosure at an auction and then unload a few months later for higher price. Instead, it seems based on the statistics, that many of them end up taking a loss when they turn over the sale. That's because some buyers just can't qualify for a loan, says Butler.
"Even though mortgage interest rates and prices are attractively low, tighter underwriting standards and a struggling economy and job market could continue to be obstacles for the return of homeowner-occupants," he says. "The dominant group will probably be investors scrambling to take advantage of the buying opportunities that might be slowly disappearing in many areas."
Overall, activity is picking up in the market, since March is the usual beginning of the home-resale season that lasts until August. While only about 8,600 homes changed hands in February, the number of total transactions went up over 11,000 in March. More than 4,100 of those were foreclosures. In March of last year, the market saw almost 4,400 foreclosures.
For Yazzie-Howard it will soon be farewell to her master suite with a balcony and walk-in shower, and the kitchen with granite tile counters and island bar that open to a great room where her children spent many a fun-filled evening. For the buyers, they may be glad to know that the gated community offers a tot lot, sand volleyball, park with BBQ and community pools.
Sheree R. Curry, who has owned three homes, but luckily never had an upside-down mortgage nor faced foreclosure, is a three-time award-winning journalist who has covered real estate for six years. During her 20-year career, her articles have appeared regularly in the Wall Street Journal, TV Week, and Fortune. She's been writing for AOL Real Estate since 2009 from a Minneapolis-area rental. She seeks a book publisher -- or at least a lender who'll give a reasonable mortgage rate to a self-employed mom.
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