Many potential homebuyers
who sat on the sidelines watching metro Phoenix 's
house prices fall during the past five years are back in the market, ready to
take out a mortgage and move in.
But many are finding they
cannot buy.
Armed with a preapproved
mortgage and even enough cash for a hefty down payment, they bid on foreclosed
homes and houses up for short sale -- but are outbid by investors buying houses
for cash on the spot.
Traditional homebuyers, who
typically make an offer contingent on other steps such as an appraisal and
securing the loan, find they can't compete with someone who is willing to pay
up front the entire asking price or more.
Tight supply makes the
competition even stiffer.
Home resales, averaging
7,500 a month, are at their highest level since the peak of 2005-06. But the
number of homes for sale is at the lowest level in more than a decade. There
currently are about 23,000 homes for sale in metro Phoenix , one-third of the area's housing inventory
in 2009.
With demand for houses high
and supply so low, many are drawing multiple bids.
That is not to say the
bidding wars are driving up prices in the overall housing market nearly as much
as they did in boom times. Median resale prices remain near the bottom of the
lows to which they fell after the housing crash and wave of foreclosures that
began in 2007.
But those low resale values
have kept many traditional sellers out of the market, too, experts say. Many
homeowners don't have enough equity to sell, or just don't see enough profit to
make selling and moving worth it.
The result is that much of
today's bidding is on foreclosure homes or short sales, where banks approve a
sale for less than the current borrower owes.
And in these cut-rate homes,
cash is king.
Foreclosures have declined
in recent months, as banks increasingly approve short sales to help residents
avoid foreclosure. The drop in foreclosure inventory is working to push up home
prices a little each month.
Most metro Phoenix homes for sale are still considered
great deals. Market watchers agree that long-term investors paying cash will
lead to fewer empty homes and a better market overall.
But for the housing market
to truly recover, they say, it must see a return of the regular participants:
homeowners confident enough to put their houses on the market, and perhaps more
importantly, regular buyers with mortgages and jobs who can afford to buy homes
of their own.
"Phoenix 's
housing market is in a state of fast changes," said Mike Orr, real-estate
analyst for Arizona State University 's
W.P. Carey School
of Business.
"Prices are ticking up,
and buyers are getting more and more frustrated they can't find homes,"
said Orr, who also publishes daily real-estate analysis called the Cromford
Report.
Traditional buyers
Nakisha and Lenny Williams
heard about the great deals for Phoenix
foreclosure and short-sale homes more than a year ago. The couple began
searching online. The low prices for homes built just a few years ago helped
them decide it was time for a move.
The young couple quit their
jobs, sold their Chicago-area home for a modest profit and relocated to Phoenix , where they found
new jobs fairly quickly and rented an apartment while they shopped for a home.
But the Williamses have been outbid on at least five homes so far and have been
waiting for more than a month to hear back on their latest bid on a Litchfield Park house.
Nakisha Williams works for a
water company. Though Lenny Williams recently lost his construction job, the
couple have been saving for a down payment and are preapproved for a mortgage
they can afford, if their offer of $120,000 for the home is approved.
"It's crazy for buyers
now," said the couple's real-estate agent, Yvette McDonald of Monopoly
Realty. "The Williamses are still looking for other homes while they wait
to hear back from the lender on the Litchfield
Park home, but we can't
find anything that is still available by the time we make an offer."
She has several other
potential buyers in the same position, making multiple offers that aren't
accepted or are topped by other bidders, especially investors.
Investors
Andy Rysdam has $10,000 for
a down payment and is preapproved for a mortgage to buy a home for as much as
$175,000. Recently, his real-estate agent found a potential house listed late
in the afternoon. They went to see it first thing the next morning, and already
there were seven other offers on it.
"It's the investors
getting the best homes. They have cash," said Rysdam, who is renting and
not giving up on buying a home despite already being beaten out by investors
several times.
Cash buyers, who are
typically investors looking to resell the properties or use them as rentals,
account for nearly 60 percent of all Phoenix-area homebuyers now, according to
data compiled by AZBidder.com,
an online foreclosure-auction service.
"We are seeing multiple
offers on any decent home," said Rysdam's agent, Brett Barry of Phoenix 's HomeSmart.
"These are different than the bidding wars from the boom, but buyers are
getting more and more aggressive as the inventory of homes for sale continues
to shrink."
Wealthy investors can make
more money buying foreclosure or short-sale homes in growing areas like Phoenix and renting them
for seven to 10 years until prices rebound than they can on most other
investments now.
Watson can't find enough
homes for her Canadian investor and is considering approaching homeowners
underwater on their mortgages and late on their payments to sell through a
short sale even before their lender suggests it.
"I am about to go door
to door," she said. "People don't realize they have the short-sale
option because the deals have been so hard to do in the past, but not
now."
Laura Gonzales thought she
had found the home of her dreams in Phoenix .
The elementary-school teacher has been renting a house in north Phoenix 's Desert Ridge area since she moved from California in 2007.
As foreclosures have climbed
in her neighborhood and home prices have fallen, she has slowly saved for a
down payment. In January, she found "the perfect home" listed for
short sale just a block from where she's renting. The house was bigger, and her
monthly mortgage payment would be less than her rent.
She made an offer the day it
was listed for sale. But already a dozen other offers had been made. She upped
her offer by $10,000, but at least two investors upped their offer by twice as
much.
The home ended up selling
for almost $200,000 -- more than $50,000 over the asking price.
"It was
heartbreaking," Gonzales said. "And last month, the same thing
happened to me on a house I didn't want nearly as much, but I felt like I had
to keep bidding because the homes I like are going so fast in this area."
Diane Brennan of Scottsdale 's Keller
Williams Integrity First Realty said the housing market is crazy now.
"It's nearly impossible to buy a home in the $100,000 range," she
said. "I've got tons of buyers and no properties to sell them. One home in
south Scottsdale
got 43 offers."
A rush to avoid higher
prices
Metro Phoenix 's median existing-home price has been
steadily ticking up since last August when it fell to a 12-year low of
$113,000. In February, the median price for the region was up to almost
$123,000, according to a monthly analysis from AZBidder. All types of
homebuyers see metro Phoenix 's
prices finally rising and want to close a deal before they go higher.
Some first-time buyers with
Federal Housing Administration financing have a bit of an advantage now, said
real-estate agent Barry.
Those buyers are required to
put down only 3.5 percent, so they can often keep bidding with investors, knowing
that if they win and the appraisal doesn't come in that high, the lender will
have to lower the price to meet the housing agency's requirements.
Banks might boost supply of
homes
Banks still hold many of the
homes they took back through foreclosure in recent years; the rush to buy could
push them to put more on the market.
"If lenders are holding
back on foreclosures and waiting for a sign the homes will sell, well, the time
is now," said Jim Sexton of Phoenix 's
Realty ONE Group.
"Real-estate agents and
buyers are all frustrated. The demand for homes is real."
Lenders did slightly
increase the number of new notices of foreclosure they sent last month, which
could mean more short sales or foreclosures for buyers to choose from in the
next few months.
Housing analysts say the
current buying frenzy may run its course in six months and not create a lasting
recovery. Experts say the region's housing market won't really recover until
regular homeowners, who can afford their mortgages, feel like they can sell and
make a decent profit -- not the profit of 2006, but enough to pay off their
mortgage and net a slight profit if they bought before 2000.
Regular buyers, who have to
put down 10 to 20 percent for a mortgage, might have to wait for those regular
sellers to put their homes on the market, creating enough supply to ease the
bidding frenzy. When demand is strong enough that multiple bids are made on
houses owned by homeowners, not lenders, that will be a strong sign of a return
to a normal market.
"Once sellers begin to
realize the market is recovering, and they can actually make some money on
their home, then the market will truly start to stabilize," said ASU
housing analyst Orr.
by Catherine Reagor -
Mar. 10, 2012 11:25 PM The Republic |
azcentral.com
Phoenix-area homebuyers squeezed out by investors