The Arizona Republic reports that in the Valley housing market, foreclosures are down and short sales are up. Real Estate Agent Russell Shaw of John Hall & Associates says this increase in short sales in the housing market is the reason home prices are not yet rising in the Phoenix area.
Short sales generally work like this:
- When a homeowner owes more than a house is worth, they can make an arrangement with their lender to settle for a lower amount than is owed
- The lender can prevent another foreclosure on the books, and if the homeowner
lives in the home and maintains it during the short sale, it saves the bank the often astronomical costs of having a vacant house that is prone to theft, vandalism, etc. - Also, the homeowner can walk away from the sale without a total loss the way they would have if they foreclosed
Most often, short sales are ideal for homeowners who continue to make their mortgage payments but realize they are underwater in their mortgage.
With the number of foreclosures down, housing prices should begin to pick up, but the Phoenix housing market is also seeing an increase of these short sales on the market which also devalues home prices. This is why in some areas like North Phoenix, sales are rising but prices are not.
“The prices of late 2005 and 2006, the height of the market, are not likely to come back for 10 to 15 years,” Shaw said.
Shaw notes that although about 50% of his current business is in short sales, he has begun to see a trend in traditional sellers slowly returning to the market. Though many of them purchased their homes many years ago and will not make as much profit now as they would have a few years ago, they are still likely to take a profit from the sale.
