Phoenix Foreclosures Cutting Across Socio-Economic Lines

June 17th, 2008 | Tags: Foreclosures

In 2007 the worst affected areas were downtown Phoenix but this year foreclosures are cutting across socio-economic lines and spreading its tentacles far and wide. This as per a survey conducted by Arizona State University. The report was based only those houses that had completed the full foreclosure cycle. The suburbs of Buckeye, Goodyear and Anthem are also floundering under foreclosures.

Professor Tony Sanders of Carey School of Business opines that from the pattern of foreclosures it is clear that sub-prime lending is not the sole cause for this crisis. Sub-prime lending had been concentrated in Maricopa County but foreclosures are happening in good numbers elsewhere also.

Researches are making use of data from the federal government and Loan Performance of San Francisco, a firm dealing in financial analysis. The attempt is to relate the real estate market fluctuations with different types of loan. Most of the sub-prime kind, taken during 2004 to 2006 was from the areas that were undergoing new development in the southeast valley – Chandler, Gilbert and Queen Creek. There were also some concentrations in the north as well as West Valley. The highest were in downtown Phoenix, the west of the city and north along the Interstate 17. At the time of taking loans the valuation of the units were greatly increased. These inflated figures are now falling. In some areas the drop was by about 12% from what it was from 2005 to 2007. This is in contrast to 60% price increase in many of the Valley cities from 2004 to 2005. There are many who are unrealistically trying to rein in profits from those false figures but this ploy is not paying dividends anymore. The market is finding its own level.

The market is choked with foreclosed houses that refuse to find buyers at the rate asked for. About 70% of the houses listed for sale in 2007 never managed to get sold. It seems 70% of the houses sitting on the shop shelves today will not get sold either. They continue to be over priced or have other negative factors that make them unattractive to the buyers. Right now the entry level in the market is below $250,000.

The buyers of today belong to a different lot. Most of them are not investors but they are looking for affordable residences – houses that will be made into homes.