Reader Cbass had a comment in the post below on this article on Valley foreclosures in today’s Republic.
Some suburbs like El Mirage, northwest Peoria, Buckeye, Queen Creek and parts of Gilbert were hit especially hard, with the number of people in danger of losing their homes quadrupling in the past year.
Just for the record, last year foreclosures were unusually low.
In most parts of Tempe, central Phoenix and Scottsdale, meanwhile, the rate has climbed but not nearly at the same pace.
That reminds me how fortunate I am to be centered out of Scottsdale.
Real-estate analysts say foreclosures in Arizona and nationally likely have yet to peak. Interest rates on the biggest block of subprime adjustable mortgages in the country are set to climb this fall, prompting market watchers to call for the biggest jump in foreclosures to happen in late 2007 and early 2008.
A year from now at least we’ll know the market has been through the worst.
• During the first half of this year, 84 homes were foreclosed in Anthem in the north Valley near New River. Last year, there were only three foreclosures during the same time period.
• In Avondale, 122 people lost their homes during the first six months of 2007, compared with five in the first half of 2006.
• Queen Creek’s foreclosures totaled 45 during the first half of this year, compared with two in the same period last year.
• In Buckeye, foreclosures reached 245 through June, compared with 66 in the same period last year.
“I am stuck,” the retirement-home nurse said. “I can’t afford it, and I can’t refinance and I can’t sell.”
That pretty much sums up the lives of a lot of people.
More than 130 homeowners in her neighborhood [in Surprise] are behind on their mortgage payments, according to the Republic analysis. That’s almost one out of every 10 homeowners in the area.
“The housing market faced a series of body blows over the past year: overbuilding, overappreciation, investors, tightening credit and the subprime-loan implosion,” said Nicholas Retsinas, director of the Joint Center for Housing Studies at Harvard University. “No question, the last shoe to drop is going to be foreclosures.”
Again, at least it’s nice to know there is a “last shoe.”
Gordon, like many other struggling home buyers in new edge developments who are trying to sell to avoid foreclosure, is competing with home builders offering huge incentives of $50,000 or more to sell homes.
The median price of a new home has fallen to $275,000 from about $315,000 a year ago, according to the Information Market.
The new home builders have been completely irresponsible. They built an extra half-years supply of homes in 2004 and 2005 but they have NOT cut their production much since then. That overhang of new homes continues to pressure prices years later.
The solution is easy. Arizona home builders need to seriously cut production for a year or two instead of these piddly cuts of theirs.
Since Arizona home builders won’t do it themselves, it looks like production won’t be cut until some homebuilders go out of business. Bad news for Arizona home builders is good news for Arizona home owners.
Selling is tough in edge communities, said Al Preciado of Exit Realty Community. There are people in new neighborhoods farther out who bought at the peak for $300,000 and now can’t even sell for $240,000, 20 percent less than they paid.
Arizona home builders prefer to cut their prices and screw their previous clients rather than cut their production.
[This was an excellent article. It is a great combination of numbers from Ryan Konig and their impact on people from Catherine Reagor. It’s was a great team. Konig and the Information Market should get more credit, however, because the article wouldn’t have half the impact without the numbers.]
ADDED: Here’s a take on the U.S. new home market from Credit Suisse. The logic will be the same for Arizona.
… our concerns at the time hinged on unsustainable speculation in the real estate market spurred further by excessive liquidity in the mortgage world. In a simplistic view, the removal of these two dynamics would return the market to a more “normal” environment. Related to speculation, investors’ share of the market climbed to roughly 18% in 2005 and 2006 from an average of 7% from 1998-2001, implying that a return to the mean would remove 11% of housing demand. On top of that, we expect that mortgage tightening could eliminate approximately 15-25% of buyers, implying a 25-35% reduction in peak housing production. This would likely be exacerbated by declining consumer confidence, investor demand falling below historical norms and the risk of a softening economy (all of which seem present today), suggesting at least a further 10% drop. Aggregating the various impacts would result in a 35-45% drop-off in new starts from the peak of 2.1 million homes to roughly 1.2-1.4 million, as compared to the 16% decrease thus far on a trailing twelve month basis. For comparison, starts during the last three downturns ending in 1991 (down 34%), 1982 (down 32%) and 1980 (down 37%) fell by an average of 34%.