Phoenix, Arizona

Created by: Brent SaxonAppraisal Management Services, Inc.

October 2008

In 2000, the median sale price (SFR) continued a 10+ year increase which continued through 2005

In 2005 the median sale price increased nearly 40% from the previous year Home sales grew slightly through 2003 and dramatically increased in 2004

and 2005 before sharply falling in 2006-2007 The decrease in the number of home sales can be attributed to a high rate

of foreclosures and a downturn in the market

Greater Phoenix Real Estate Trends

A closer look at the city of Phoenix shows a similar pattern Home sales varied throughout the 2000’s, but still show a

decrease in activity beginning in mid 2005

Phoenix Market Trends

The average list price and average sale price both fell approximately 45% in Phoenix

From October 2007 through October 2008, sales began increasing, however, the price per square foot began to drop

Phoenix Market Trends

In Mesa, the average sales and list prices dropped approximately 28% from October 2007 to October 2008

The average price per square foot decreased from $152 to $108, or 28.95% in the same period

Greater Phoenix Market Trends

Scottsdale saw similar declines in list and sale prices, approximately 29%

While the days on market held fairly steady, the price per square foot dropped 23.13%

Greater Phoenix Market Trends

Factors Affecting the Market

In the larger neighborhoods, builders continued to add more homes, at reduced prices while investors are trying to sell and lenders are seeking buyers for foreclosures

This led to declining property values throughout Phoenix, but some of the more established neighborhoods (built and bought before the boom in 2005) held steady and the owners had not over extended themselves

Total Building Permits Applications

0

10,000

20,000

30,000

40,000

50,000

60,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

*

Units2000 34,256 3.70%2001 34,912 1.88%2002 40,002 12.72%2003 47,240 15.32%2004 56,896 16.97%2005 54,446 -4.50%2006 35,753 -52.28%2007 26,508 -34.88%2008* 38,472 31.10%

% Change from

Previous Year

Out of state investors, mainly from California and Nevada, played a lead role in the rapid price appreciation and shortage of available homes

Investors and speculators began buying one or more properties in 2005 when prices were getting higher in Nevada and California

Record low interest rates in 2005 led to people buying multiple homes for investment

This led to an unprecedented increase in prices in 2005, 35.62% as reported by ASU Realty Studies.

2000 $136,793 5.66%2001 $142,623 4.26%2002 $149,410 4.76%2003 $160,235 7.25%2004 $179,191 11.83%2005 $243,014 35.62%2006 $278,325 14.53%2007 $263,501 -5.33%

Median Sale Price

% Change From Previous Year

Investor Speculation

Overall, Phoenix was hit the hardest by the rapid appreciation followed by record setting foreclosures

The worst areas have been western Phoenix

Arizona was a mortgage fraud “hotspot” according to RealtyTrac, Inc, Fannie Mae, and other industry corporations

Mortgage Fraud

Mortgage Fraud

Arizona ranked 6th in Subprime mortgage fraud in 2006 (MARI:9th Periodic Report to MBA, April 2007)

Downtown Phoenix Hit Hard

*Arizona State University, Dept of Realty Studies

Arizona documented the third highest state total in the third quarter, with 40,419 properties receiving a foreclosure filing -- a 9 percent increase from the previous quarter and a 189 percent increase from the third quarter of 2007.

Phoenix documented the sixth highest metro foreclosure rate, with 2.11 percent of its housing units receiving a foreclosure filing during the third quarter.

In 2007 the difference in the median home price b/w foreclosures and traditional sales was 17.5% ($222,073 – $269,021)

Foreclosures Affecting the Market

Arizona ranked 4th in the nation in foreclosures with 1 house in every 201 having filed for foreclosure

In one Phoenix neighborhood, only five homes were foreclosed on in 2005

In 2006, 15 were foreclosed on, most in the last two months of the year

In 2007, 75 homes were claimed by the banks

Foreclosures Affecting the Market

This chart further illustrates the trend of increased sales in 2005 with a substantial decline after, this chart represents the sales of SFR and condos

Notice in 2008 that new home sales remained on a decline while re-sales were beginning to increase

This is due to the increase availability of re-sales, from foreclosures, that have been offered at lower prices

Foreclosures Affecting the Market

The break down of single family and condo units give more insight to how this trend has affected each area

Single family homes have experienced the largest decline in property values but are seeing increased sales activity

New construction has taken the largest hit in number of sales

According to Arizona State University Realty Studies, the high rate of foreclosure sales is pushing down home values across the Phoenix area. For the traditional sales market, the median price of resale homes in Maricopa County was $175,000 in October, while foreclosed properties had a median price of $159,775. One year ago, the median prices were $250,000 and $218,225, respectively

Foreclosures Affecting the Market

The chart below shows the percent of the normal, short sale, and REO properties representing both active and sold properties

In Phoenix, REO and short sale properties make up the majority of the listings and sales since 2007

Foreclosures Affecting the Market

In Las Vegas, Phoenix, San Diego, Washington, D.C., and much of Florida, an estimated 25% to 40% of condos under development or apartments that were converted into condos for sale will be put back on the market as rentals, says Marcus & Millichap, an investment brokerage firm.

During the real estate frenzy, thousands of apartment renters were forced out by landlords who converted their units into condos for sale. Last year, about 200,000 apartments were sold for conversion to condominiums, on top of 135,000 new condos. (USA Today 7/14/2006)

Condominium Market

The condo market followed the same path as single family homes through 2008

The abundance of available units and the lack of potential buyers caused an over supply and rapidly decreasing values

Many are being converted into apartments

Condominium Market

Due to the wave of foreclosures and the decrease in sale prices back to the 2003 and 2004 levels, speculators once again have an eye on PhoenixInvestors are encouraging people to invest in real estate in the Phoenix market for the long term outcome potentialPrior to the rapid appreciation real estate appreciated 5%-6% per year for a long, relatively stable periodAlthough the decline may not be over in the short term, it is hopeful to return to a stable or increasing market over the next decade

This presentation was for informational purposes only. All information was gathered from third party studies and is believed to be accurate but is not warranted. We hope this presentation will aid you in lending or review decisions in your market area. For additional information please contact Jeff Bass at (678) 354-8363 ext. 116 or jbass34131@aol.com for additional information. You can also visit are website at AppraisalManagementServices.net