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Property values rising but foreclosures still an issue in Arizona

Posted on 2/18/14 7:42:00 AM

With rising median values and improved sales totals in 2013, the housing market in Tucson, Ariz., continues to show signs of life.

Still, some experts believe median home values might have climbed even higher if foreclosure sales hadn't hurt property prices so much. That might come as a surprise to many tracking the market's housing data because trustee sales in Tucson dropped 40 percent last year, according to the Arizona Daily Star.

"That's huge, especially when Tucson has been ranked in the top 10 or top 15 of places (for foreclosures)," Kimberly Clifton, president of the Tucson Association of Realtors Multiple Listing Service, told the Daily Star.

Foreclosures and short sales tend to pull down a neighborhood's median home value because the seller and lender typically sell for much less than the mortgage balance.

Ginger Kneup, a local real estate analyst and owner of Bright Future Real Estate Research, told the Daily Star that resale prices in the area won't make a major jump until foreclosures fall back to a normal level.

"We have largely recovered in our volumes in the resale market and right now it's kind of just a matter of absorbing those foreclosures," Kneup told the Daily Star. "We look at the appreciation not being as much as we would like it to be, but the progress is kind of underlying that. There's an undercurrent of weeding through these foreclosures, and we can't really move things forward until that's done."

Tucson homeowners surfacing from an underwater mortgage should consider a home equity line of credit if home improvements are on their 2014 wish list.

Foreclosures in Tucson
According to the Daily Star, some industry insiders thought foreclosures would plummet after a vast number occurred in 2012 and 2013. While foreclosure rates have dropped in the area, they still remain at a historical high.

Kneup said that over the last five years, lenders have discovered that working out a loan is "far preferable to foreclosing on the loans." She believes that many lenders have amped up their efforts to work with homeowners to stave off foreclosures. Clifton concurs.

"I think there was some idea that there was this holdback (by lenders), and we're not really seeing that," said Clifton, who also owns Tierra Antigua Realty. "I think what has happened is that the process has really smoothed out, so to speak."

Investing in foreclosures
Clifton said investors in Tucson are finding it harder to make fast cash on foreclosure homes.

"There have always been foreclosure and agents that specialized in foreclosures, but now instead of three or four guys down at the courthouse steps, now there's 30," Clifton said. "Everyone wants to make a quick buck and the problem right now is, especially in the investor market, there are fewer and fewer homes that are selling with a high margin, which is a good thing for the consumer, quite honestly."

Despite the high inventory of available homes, Clifton said the market has remained relatively uneven.

"We're not in a buyer's or a seller's market right now," she said. "There is a good amount of inventory, but it depends on the price range you're in, or the area you're looking for. If you're looking in the northwest, there's a ton of homes for sale. Other areas, it's much less."

Mike Orr, Arizona State University's director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business, told The Arizona Republic "it won't be long before supply will exceed demand."

The Republic reported that sellers who have seen nearby properties dealt within 30 days over the past year might need to be especially patient.