The booms and busts of metro Phoenix’s housing market have yielded a wild ride for homeowners and the area’s economy.
I started covering the region’s real-estate industry almost two decades ago, as it was still recovering from the 1990 crash. Trends and characters in the housing market, one of Arizona’s biggest industries, have surprised, delighted, disappointed and angered me over years.
It’s a good time to reflect. The Valley’s housing market is showing renewed signs of recovering from the last crash. And The Arizona Republic is publishing its most sweeping analysis with the latest Valley Home Values special section on real estate this weekend.
My top 10 list of events and players that have steered and shaped Valley’s housing market — from worst to best.
No. 10: Bad loans
Big lenders and Wall Street pushed risky, high-cost subprime mortgages during the most recent boom. Most borrowers didn’t have a chance of affording the payments, so the loans were doomed for foreclosure. These corporate giants started the boom and inevitable bust in metro Phoenix and other high-growth areas, and then took government bailout money during the recession.
No. 9: Speculators
Investors, many inexperienced and from out of state, began buying houses with loans that required little to no money down in 2004. When prices started to fall a few years later, most of these speculators walked away from the houses and loans. During 2005, at least one out of every four homes sold in the area was bought by investors, many of whom lied on loan documents about how many houses they were buying.
No. 8: Cash-back deals
A wave of mortgage fraud that involved inflating home values and led to many foreclosures started in metro Phoenix. The scheme revolved around speculators flipping houses among themselves every few months during 2006-07, and taking cash out of each deal. The monthly 5 to 10 percent jump in Phoenix home prices and lack of regulation among the state’s loan officers allowed this scam to work. Arizona ranked on the FBI’s top 5 list of worst states for mortgage fraud because of cash-back deals.
No. 7: Loan modifications
The federal housing plan, announced by President Barack Obama in Mesa early in 2009, called for helping struggling homeowners get loan modifications. People, who lost jobs or had their income cut during the recession, applied for the government-backed program to reduce their monthly payments and keep their house. Lenders stalled, lost and mismanaged applications. Many homeowners contacted their lenders repeatedly, made regular payments in “trial modifications” and found buyers to sell through a short sell but still were still foreclosed on.
No. 6: Real-estate agent boom
The crazy pace of home sales during 2004-06 enticed too many Valley residents to quit jobs as teachers, firefighters and other important community roles to become real-estate agents. Most of those agents were then out of work within a year or so as sales fell. Veteran Realtors say too many inexperienced agents exacerbated the problems that led to the crash.
No. 5: Foreclosure auctions
When lenders decided to sell houses they had foreclosed on for a loss in early 2011, bidding wars for the properties began. The daily foreclosure auctions in front of the Maricopa County Courthouse drew hundreds of bidders with cash in hand. These deals helped liquidate the Valley’s large foreclosure-home inventory quickly, which led to the beginning of the recovery. Money was made by many investors.But it was adding insult to injury when people lost their house, seeing it sell at auction for less than they owed on it.
No. 4: Rental boom
Several big investors, including Wall Street firms, bought Valley foreclosure houses and turned them into rentals. The region needed more rentals because people who lost houses couldn’t buy again. In some cases, families were able rent houses similar to the ones they lost for half the monthly payment. Not all homeowners have been thrilled about having more rentals in their neighborhood, but at least most of the Valley’s investor-owned houses aren’t vacant or neglected. So far, these big investors are holding onto the tens of thousands of Phoenix-area houses they purchased between 2010-12. If they decide to all sell at the same time, it could hurt home prices.
No. 3: Housing economy
Real estate and growth have long dominated the state’s economy. But no one had put a dollar amount on the industry’s impact to Arizona until 2004. One out of every three dollars generated in the state’s economy came from housing that year. I led the year-long project that involved economists, developers, brokers, buyers and retailers and was still surprised how dominant the housing economy had become.
No. 2: Urban growth
The Valley’s growth pattern is changing as more buyers and renters opt to live closer in. For the first time, condo sales are outpacing single-family home sales in the region. This move from suburban-dominated growth to more urban housing is key for the region to mature as a big metro area and housing market. See today’s 1A story. .
No. 1: Owning a home
The resilience of Phoenix-area homeowners, who have hung in as their neighbors lost homes to foreclosure and their values plummeted, tops my list. Almost 18 percent of Valley homeowners are still underwater, but they are holding on as evidenced by short sales and foreclosures falling back to pre-crash levels. Buying a home isn’t all about a quick profit, and it can’t be for an area to have a healthy housing market.
Cheers to the people who buy houses because they want to live in them.
Special Report: Valley Home Values
It’s the hottest neighborhoods, the latest trends in one special report, coming out this weekend. Real estate reporter Catherine Reagor combs through housing data for 2014 to analyze the trends that affect your home values and your neighborhood. Among the highlights:
-For the first time, metro Phoenix is growing up more rapidly than out, with a surge of condominium and infill projects. Core areas in many Valley cities are showing a resurgence in prices as more people seek to live closer to work, entertainment and new restaurant hubs.
-Home prices were fairly steady for the year, after two years of robust growth in 2012 and 2013. Metro Phoenix’s median sales price rose 5 percent, to $207,000, in 2014.
-Housing analysts project a rise in demand, and sales, during the peak spring selling season this year.
In the special report coming this weekend, learn:
-Which areas are poised for growth?
-What is your home worth? Find prices for every ZIP code in metro Phoenix.
-And new this year, get deeper profiles of 20 key areas where housing interest is high.