Here’s an interesting fact about the Phoenix real estate market: there was a record number of transactions in 2009 – nearly 2,000 more Phoenix home sales than in the previous record-holding year (2005). According to ASU’s online magazine Knowledge@W. P. Carey, “As it happens, the two years are book ends around a historic run up of real estate prices and the subsequent crash.”
In 2005, according to ASU real estate professor Jay Butler, there was a feeding frenzy in the Phoenix real estate market. “2005 was sort of driven by euphoria. Prices were going up. People were buying homes to live in or invest in almost without any reason to it.”
Last year the real estate feeding frenzy returned, though it looked quite different – while Phoenix real estate in 2005 was driven by rising home prices and a boom in building on the urban fringe, the market in 2009 was driven by one product of depressed home prices: foreclosure.
In 2009, according to Butler, “40 percent of the recorded resale activity were homes being foreclosed on. Of course, we didn’t see that back in 2005. Also, probably another 30 percent or 40 percent of other transactions were homes that were foreclosed on being sold back into the market.” So a full 80% or so of the Phoenix real estate market was foreclosure-related.
Of course, that’s a good thing for the long-term health of the real estate market. Now that we are where we are (an environment where prices have fallen more than 30% and people have lost jobs and income) we’ll only recover once the homes that are going to go into foreclosure do and are bought up by owner-occupants and investors. It’s getting rid of the excess housing inventory that will get us out of this housing crisis.
“2010 is looked to be a year of transition as we move from this heavy activity in the foreclosure market, and we begin to have less and less foreclosures throughout the year,” Butler said.
Listen to Butler’s podcast or read the transcript at Knowledge@W. P. Carey.
What do you think? What’s your outlook for the Phoenix real estate market in 2010? Click on the “comments” link below each post and join the conversation!
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