No topic has dominated the Phoenix real estate market like foreclosures, also known as bank owned homes or REO (real estate owned) properties. Demand for these homes was so high at one point in the year that I built an entire website dedicated to nothing but Phoenix bank owned homes.
What was most intriguing is interest in bank owned homes was peaking as inventory was on the wane. The moratoriums of last fall and this winter past lessened the number of bank owned properties coming to the market and the REO inventory fell steadily from the first quarter of 2009 onward.
As this was happening we kept hearing about the next wave of foreclosed properties to hit the market, except that wave never materialized. Homes continued to be foreclosed on at a substantial rate but lenders collectively realized flooding the market with a glut of homes just as demand was gaining transaction was financial suicide.
Does anyone remember the fervor over the Wii a couple of years ago when Nintendo was realizing the gaming system at a trickle – a few here, a few there? See any shortages of Wii gaming systems this year? Probably not, because Nintendo opened the gates a while back and filled shelves. (The same strategy was used for the once hard-to-find Wii Fit.)
There’s nothing particularly sinister about individual lenders deciding not to flood the market and instead maintain a steady, slower flow of homes (unless you want to take a look at things from an accounting standpoint, where banks don’t want to take the hit on their books by releasing the deluge.) It’s basic – and solid – economic theory.
It was hard for some to see earlier in the year but has become more apparent as the year has gone on that the increased interest in bank owned homes would be the high tide that eventually raised all the proverbial boats. That has come to pass, if not from a pricing standpoint then at least in terms of interest and demand.
Much of the focus is on the lower price points but well-priced homes at higher price points also are selling. Take the following home in Arrowhead Ranch:
I sold this 3,000-square foot home for $325,000 in just 23 days … considerably less than what it went for three years ago but at or even slightly above market averages because of the upgrades the last two owners have made.
$325,000 may not sound like much in some parts of the world but in the Phoenix real estate market in 2009 it’s just shy of three times the area’s median sales price. And, as I mentioned, it sold in 23 days.
As we close the chapter on 2009, bank owned homes remain a significant factor in the market. But unlike last year, they’re not the entire game anymore.[tags]Phoenix real estate[/tags]