Foreclosures and Equity in Arizona – How do we Rate?
The West has been a leader in the number of foreclosures in the United States in first half of 2009. But have things changed? What about the amount of equity in homes? How much have Arizona homeowners lost, and how does that compare to our neighbors?
First, in Phoenix, house prices have declined up to 50% from the peak. Prices have declined by double digits everywhere around the country, with the South West US the most affected (except for Texas’ housing market – which has shown remarkable resiliency). This means that not only will homes be lost, but also the equity in the homes retained will disappear.
California, Florida, Nevada and Arizona have been in the top four in foreclosure filings throughout the year. Arizona has popped in and out of the top three. For example, in August a 10% month to month decrease in foreclosure activity helped lower Arizona’s rate to fourth in August. But the month before, Arizona securely held third place, with one in every 135 housing units receiving a notice of trustee sale. Among Arizona’s metropolitan areas, Phoenix-Scottsdale-Mesa has the highest foreclosure rate.
As might be expected, the crash in values means that Arizona owners have lost the equity cushion in their homes. As much as 68% of metropolitan Phoenix homeowners have no or negative equity, according to Catherine Reagor of the Arizona Republic (www.azcentral.com). This means they are “underwater”, and owe more than their home is worth. And it is expected to get worse before it gets better.
Ms. Reagor obtained these numbers come from a new report by Deutsche Bank Securities entitled “Drowning in Debt – A Look at ‘Underwater’ Homeowners” (http://188.8.131.52/search?q=cache:IL5u5iFvhCwJ:pull.tmr3.com). In that document, the Wall Street firm states that before home prices stabilize next year, the negative equity number figure for our Phoenix metropolitan area is expected to reach 78%.
But we aren’t the worst. Looking at the foreclosure numbers, it is not difficult to figure which states will be the leaders in the negative equity parade: California and Florida. Number one is Merced, Ca, with a whopping 85% current underwater figure. Modesto, Bakersfield and Riverside in California, as well as five Florida cities, rank ahead of Phoenix in this statistical category. Las Vegas, Nevada is number four overall. Frightenly for the residents of Fort Lauderdale, Florida, it is expected that 93% of all homeowners will be in the red in the next two years.
When applied to Arizona, the foreclosure and negative equity numbers are consistent with the predictions of our market made in past few years by local experts. As I had written in an earlier blog entry, Elliott Pollack, an Arizona economist and real-estate investor, prophesied that a full recovery will probably take three to five years from the bottom of the housing market. With the bottom expected to be around now (fall of 2009), values won’t likely return before 2015.
Therefore, patience (the ability to delay a discretionary move) and/or acceptance (listing at a realistic price based on current conditions) will be required to survive this slowdown. At SimplySOLD, we have the expertise to guide home owners or buyers through a successful sale. Visit or contact us at www.simplysoldaz.com for more info on how we can help you.
– N. Mark Kramoltz © 2015