The housing market could be coming back to life in the Valley. Inventories are down, foreclosures are down, and prices could soon be up. Real Estate Reporter Catherine Reagor of the Arizona Republic will give an update.
Ted Simons: If you're waiting for the home prices to bottom out before you buy, you may have waited too long. Prices continue to rise as the homes on the market decline. Here with an update is Catherine Reagor, reporter for the "The Arizona Republic." I told you next time we get you on will be for some good news.
Catherine Reagor: This looks like pretty good news. We have been making our way towards it. Foreclosures have been slowing, sales have been climbing. We kept hearing prices will climb when that all happens and they are. They are climbing fast, almost as fast as during the boom.
Ted Simons: As high as 10% a month?
Catherine Reagor: In some. It was tracked per square foot, and he tracked an 8.6% in 30 days climb over all in the Valley's median price. And that is second -- Well, that beats the boom in 2005, when it climbs 7% in a month.
Ted Simons: We're seeing a lot of bidding wars out there between, what, investors and regular buyers?
Catherine Reagor: Yes, because there just aren't enough homes on the market. Foreclosures are down, and lenders, the homes they have are slowly being let out so they don't dump them on the market and drop prices. If they feel they can make some money, that's going to even out. People waited for the bottom and they see we're past it.
Ted Simons: As far as investors are concerned, who are these people?
Catherine Reagor: International -- last time around we had individual investors, you take out a home equity loan and buy two other houses. This is not millionaires, it's billionaires buying on the courthouse steps. They want $10 million, $20 million per home, and they want to hold this for 10 years. The return on their money they get on rentals is better than they can get on any stock market, stock or currency right now.
Ted Simons: The report had 60% of homes sold in the past year in cash?
Catherine Reagor: Just in the past month. We've fluctuated, sometimes we've been 70% a month, but yes. 99% of cash buyers are investors. And they can close like that, they can close as is, they don't have to go through the appraisal, the inspection. You know, the bidding war, the cash is there. They win out most of the time.
Ted Simons: Is it -- mostly the activity we're seeing still mostly on the lower end? Is the higher end of homes still kind of in a slump?
Catherine Reagor: It's really below $350,000. That's our loan limits, that's what Fannie and Freddie will back. People who have 20% or 10% down, that's really their limit. That's where we're seeing the action. Homes that sold for $600,000 five years ago are now selling for $300,000 and it's a great deal.
Ted Simons: Those lower priced homes I would imagine would be some of those areas that were the first to get hit by the crunch, are they the first to recover?
Catherine Reagor: Yes. But now it's closer in. Gilbert and Chandler, median prices are up to 180. When the overall median price is 120, 125, that's really good. The schools and shopping, they are just coveted neighborhoods. North Phoenix, parts of Arcadia, we have shifted from the foreclosure to the short sale. Lenders realize they can make more money on the short sale and they are closing them faster. The homeowner gets nothing from the short sale but the lender gets more money. As a homeowner next to that house, it's going to be a higher price.
Ted Simons: You would certainly hope so. With all this investor activity, is this healthy? Short and long-term, what does it mean for the market?
Catherine Reagor: The concern is the investors, the bubble. This is different money. I don't want to say it's smart money, I want to say it's kind of Warren Buffett-ish money. You may call that smart money. These people have advisors, they have looked at the market, they want to buy in bulk and rent for a long time. These aren't the flippers. These are the people, eight to 10 years, they can make the money on the rents. And they are paying cash. Do you walk away from cash?
Ted Simons: What does it mean to neighborhoods when the houses that were all owner occupied are now becoming rentals?
Catherine Reagor: Yes, it's true. If one buys them and Fannie May and Freddie Mac aren't just holding them and they are standing empty and getting graffiti, at least they are fixing them you the and trying to get renters. We had a lot of people that walked away and wanted to rent. A new generation of 20-somethings who see this happening to their parents and, I don't want to buy. I can rent a three-bedroom condo in Tempe. Rent in this great high-rise. I'm going to wait.
Ted Simons: When did this rebound, do you think, really start? Was it late last year?
Catherine Reagor: Yes. We hit like our third bottom in August. Our median price went down to $113,000 and we all went, oof. Not great. Since then, steadily increasing. But this year literally neighborhoods are seeing 5% to 10% increases a month. The experts are saying, Mike Orr, they are all saying you can't look at a deal that was started 90 days ago and just closed, the prices changed that much. You have to look at deals that are negotiated three weeks ago to look at a price.
Ted Simons: Lot of activity and encouraging news here. Still, the median price is still below like 2002.
Catherine Reagor: It is. It's better than 113. I'm going to be the optimist. I've been fighting for this housing market. But it is going up. And we do see the buyers and the demand, and the chain of supply. And that is $20,000 off our 2002 price, which would be a normal price. If we continue to climb steadily, we're on our way back. For the past four years we've been up and down, not knowing the bottom. Here we have six months of continuing increases and so much demand from not just investors but first-time home buyers that are preapproved. They want to get in, they want their own home.
Ted Simons: As long as the banks don't flood the market, you say that's not the case because they are kind of slowly leaking.
Catherine Reagor: Our mortgage delinquency rate, which is people behind on their mortgages dropped. We had one of the biggest drops in the country. Unlike Florida, California, Las Vegas, they didn't. Why are they reporting the delinquencies in California, Nevada and Florida? Why wouldn't they report them here? That's another good sign. We see the jobs coming.
Ted Simons: You're just all full of good news, aren't you?
Catherine Reagor: Well, I hope.
Ted Simons: It's always good to have you here, good or bad news. Good to see you, thanks for joining us.
Catherine Reagor: Thank you.
Catherine Reagor:The Arizona Republic;