Source: The Republic | azcentral.com
by Catherine Reagor - Oct. 27, 2012 11:20 PM
For the past five years, tens of thousands of homeowners have been frozen in place, unable to sell their homes for a profit.
Now, there are signs a thaw is under way.
Sales by owners who are not facing foreclosure or a distressed sale
are on the increase again, a trend that real-estate analysts and agents
say points to a fuller housing-market recovery eagerly awaited but still
in the early stages.
Also, foreclosures and short sales, which have dominated the market
and dragged down metro Phoenix's home prices since the crash, have been
slowing steadily this year.
Profits made by regular sellers haven't been huge so far, but they
have risen with the region's 35 percent increase in median home prices
over the past year. More people who have owned their homes a long time
find they can sell and make a satisfactory profit. More who bought near
the height of the boom are no longer underwater, meaning they now owe
less than what their house is worth.
In August, the median price of a regular home sale in metro Phoenix
climbed slightly to $185,000, about $30,000 more than the median for all
sales, according to new data from Arizona State University's College of
Business.
Last month, the number of regular resales, or homes sold by an owner
without lender aid, was 81 percent higher than the same month a year
earlier.
"The latest trend is normal sellers are back," said Jim Sexton of the
Phoenix office of RealtyOne Group. "We are going back to normal, with
an owner occupant moving to another Valley house after selling a home
for a profit."
Jason and Kate Raber are part of that awakening market.
The couple paid $188,000 for a three-bedroom house in Chandler in
2004, right as the boom was beginning. The value of their home dropped
during the crash but then began rising steadily during the last three
years.
The Rabers, who didn't have children when they bought the house and
now have three, decided it was time to sell. They listed their home for
$229,000 and sold it the next day for $232,000 at the end of September.
Their agent, John Gluch of HomeSmart Realty, said the couple were
surprised that the offers came in so high and so quickly and that they
were able to sell their home for more than the asking price the next
day.
The Rabers are buying a larger home in Chandler closer to their parents.
"The market has finally improved enough for many regular sellers to make a move," Gluch said.
Getting 'unlocked'
Since home values plummeted more than 50 percent during the crash,
many Phoenix-area homeowners have been unable to move or refinance,
particularly if they bought near the peak.
People who needed to sell and move for a job had to rely on their
lender to approve a short sale, which allows borrowers to sell for less
than they owe on their mortgage. Others who lost a job or saw their
income fall often had no option but to stop payments and face
foreclosure.
The area's drop in values left almost 60 percent of homeowners
underwater in 2009, according to CoreLogic, a national real-estate data
company.
Federal foreclosure-aid programs helped some borrowers, but foreclosures still soared to 10,000 a month three years ago.
Demand from buyers, particularly investors purchasing foreclosures in
metro Phoenix, has pushed prices up since last fall and allowed more
homeowners to sell.
New data shows fewer than 30 percent of metro Phoenix homeowners are underwater.
Many homeowners want to be closer to jobs or schools but have had to wait for home values to rise so they could move.
Tom and April King wanted to sell their north Scottsdale home in the
McDowell Mountain Ranch community last year and move closer to Tom's job
in Phoenix.
They bought the house in 2003 for $610,000. In March 2011, they tried
to sell it for $650,000 and received an offer, but the appraisal came
in at $620,000, so the deal fell through.
The Kings made some improvements, including new flooring. At the end of August, the couple re-listed their home for $670,000.
Their agent, Jeff Sibbach of Realty One Group, said the house attracted multiple offers and sold within days.
"As home prices and sales climb, homeowners are becoming unlocked in
their houses," he said. "People finally have the chance to move up or
move down."
Long-term owners
Some people, including empty-nesters, bought many years ago and have
wanted to downsize or move up to a bigger home using their equity.
However, many homeowners lost equity during the crash or spent it before
the downturn via home-equity loans.
But now, as metro Phoenix home values are climbing, retirees or
others who planned to be in their home for a while are taking steps to
sell or are considering it.
For some long-term homeowners, selling now may be a bittersweet
experience. On the one hand, they may be rewarded with more profit
because they resisted the temptation to pull tons of cash out of their
home in the bubble and gorge on furniture, cars and vacations -- or jump
from a modest home to a luxury home and get in over their heads.
On the other hand, their home now may sell for far less than it would have in 2006.
Then there are those who bought mid-crash but decided to hang on until the market bottomed out and started recovering.
Darin Kastning and Patrick Rizzo moved from their longtime home in
Washington state to Gilbert four years ago to retire. The couple paid
$160,000.
They got a great deal on their house and "fell in love with the desert."
But Rizzo said they began to miss their families in Washington, yet
they still decided to hold onto their house until they could make a
"nice" profit. The couple closed on the sale of their Gilbert house last
week. They sold the home for about $50,000 more than they paid, said
their agent, Diane Brennan of Scottsdale-based Trillium Properties.
"The word is getting out that regular homeowners can sell," said
Brennan, who hosts the "That Real Estate Show" on KTAR radio. "Some
people are already getting overly eager and overpricing."
Hold or sell?
Now that home prices are steadily climbing, regular homeowners face a dilemma.
More can sell for a profit, but, if they can wait a few years, they
might be able to make a bigger profit. There are predictions of soaring
values again, so some wonder if it's better to wait. Some are choosing
to rent out their current homes because the market for tenants is
strong.
Yet no one is sure how long prices will continue to climb and at what
pace. Metro Phoenix's huge group of investor homeowners is a wild card;
if many of their homes go up for sale at once, prices could level off
or deflate. In addition, anyone who waits to sell in an appreciating
market and then buys in the same market may pay a higher price for the
next home. Mortgage interest rates also can be unpredictable;
historically, they are now at basement levels.
One option is to rent the house out and become a landlord, trying to
buy time before selling. But that has its own complications, and an
investor may need to hire a property-management firm to maintain the
home and collect rent.
Instead, many regular homeowners are deciding to sell; as a result, the supply of homes is growing.
James Caylor didn't think he would be able to sell his north Phoenix
home in July when he found a better-paying job in Chicago. He considered
renting it out but didn't want the hassle of worrying about late rent
payments or a tenant damaging the home.
Caylor put his house, which he bought in the mid-1990s, on the market
for $170,000, almost double what he owed, and sold it within days. An
investor bought the house and paid cash, so Caylor was able to close the
deal fast and is looking to buy in Chicago.
Selling to investors
A record number of investors continue to buy metro Phoenix homes each
month, despite rising prices. Since foreclosures have slowed, investors
are now outbidding regular buyers for homes owned by regular owners.
Most investors are looking for houses costing $100,000 to $200,000 that
are less than 10 years old, such as Caylor's home.
Caylor had no qualms about selling to an investor, and the deal went
through easily because the investor paid cash. Caylor was glad since he
had already moved out of state.
If prices continue to rise, fewer investors will buy because the
houses will be too expensive to rent out for a profit. That will open
the door for more regular homeowners as long as they can still afford
the prices.
"There are lots of regular buyers out there waiting for a chance to
buy," said Mike Orr, publisher of the Cromford Report and real-estate
analyst at ASU. "We will know the market is in a full recovery when
regular owners can sell and regular buyers can afford those homes."
