In 2003 the Maricopa real estate market was a hot commodity. Houses were being built and sold in record numbers.
However, fast-forward to 2008. Maricopa is still leading the pack, but it is leading in the wrong categories: foreclosure rates and drops in home values.
“Maricopa was one of the first to feel the housing boom, and they are being hit the hardest by the slowdown,” said Director of Realty Studies Jay Q. Butler. Realty Studies is a program at Arizona State University that gathers and analyzes information in the real estate market
Here is a breakdown on the condition of the Maricopa market:
“Thud” is the sound many residents of Maricopa are waiting to hear.
Prices in the Arizona real estate market have been continuously falling for more than a year with Pinal County feeling the largest decline.
A year ago homes in Pinal County sold for roughly 78 percent of the price of a home located in Maricopa County. Today that number is down to 70 percent, according to a report released by Realty Studies.
“When the housing boom started, gas was affordable, and many people felt they could commute to work from the outlying communities. That led to a lot of growth in areas such as Maricopa, but now with the cost of gas so high that a commute isn’t as attractive, sellers are having to lower prices to get people into those communities,” Butler said.
Maricopa real estate agent Deborah Farhat thinks the reason for the fall in prices is the simple equation of supply and demand.
“The number of buyers in the area decreased, but the number of homes increased, so to attract people back to the market the prices had to fall,” Farhat added.
Further investigation of the data shows that Maricopans have felt this drop in home prices more than any other community in Pinal County.
The median price of a home sold on the market a mere 18 months ago was $246,000; today that price is down to $161,000, according to numbers compiled using the MLS.
“Ouch,” Farhat said, in regard to the idea of losing a little over $80,000 in the median home price.
One factor driving the dip in median home prices in the area is the number of foreclosures.
“Foreclosed homes tend to be lower priced than standard resale properties or new home constructions,” Butler said.
Pinal County has the highest foreclosure rate in the state at nearly 1.6 percent, and, of the cities in the county, Maricopa has had the most homes go into foreclosure since the beginning of the year, according to numbers published by realtytrac.com, a Web company that analyzes national foreclosure numbers.
One reason for the high number of foreclosures is that in 2003 to 2005 the loan requirements were loose, and many people were able to get into homes they could not afford, according to Farhat.
Paul Jepson, assistant to the Maricopa city manager, concurs that many people were in a rush to get a house in the area and got into unconventional loans such as the adjustable rate mortgage.
“They saw the home prices continually rising and thought they needed to buy before prices got any higher,” Jepson said.
To get into these homes while the market was hot, people used 80/20 loans or even adjustable rate loans; now that their payments have increased, they can’t afford the home any longer, Farhat added.
Besides the first time homebuyers, investors and many people looking for a second home saw the city of Maricopa as a prime opportunity.
“If you look at the data, about 25 percent of homes in foreclosure in the area are investment properties or second homes. These people bought these homes hoping to turn a profit, and that didn’t happen,” Jepson said.
One effect the number of foreclosures is having on the local market relates to the construction and sales of new homes.
In the first quarter of last year there were 655 permits issued for the construction of new homes. In the first quarter of this year there were only 320, according to RL Brown Reports, a Valley-based company that provides information on the new home market.
In addition to the decrease in number of homes built, there were 134 fewer new homes sold in the first quarter this year as opposed to last year.
“A year ago the number of foreclosures was lower, and a new home was a more attractive option to buyers, but today that trend has been reversed,” Farhat said.
Despite the grim state of the real estate market, the city is continuing to grow and rebound trends are starting to appear.
One sign of this continued growth is evident from enrollment records and the construction of new schools in the city.
The number of high school students enrolled has increased by an average of 46 students a month. At the start of this school year there will be four new schools opening, according to Jepson.
Another promising factor for the city is the recent increase in home sales. Since January the number of homes sold has continually risen.
“Not only have we seen an increase in the number of homes sold, we are starting to receive multiple offers on homes,” Farhat said.
“It is the first time in a long time we have gotten multiple offers on homes,” Farhat added.
Farhat believes that the sales increase is directly related to the price decrease and, as sales continue to rise, the prices will stabilize. “The buyers are starting to come back,” Farhat noted.
“When people see the prices of homes in Maricopa and that the activity is starting up again, the feeding frenzy will be renewed,” Jepson said.
One thing that will help this renewed market stay strong is that lenders and borrowers are staying away from adjustable rate loans. “We haven’t seen any adjustable rate mortgages this year and lenders are being more responsible with loans,” Farhat said.
Another aspect that could lead to fewer foreclosures in the future is that fewer investors are buying.
“The majority of homes we are selling are to first-time home buyers,” Farhat said.
Farhat believes the city will continue to see a steady number of foreclosures for the next couple years, but after that they will slowly dwindle.
“When the foreclosures start coming off the market, it will increase the need for new construction,” Farhat said.
Besides the increases in population and home sales, another encouraging sign is that homes are still being built.
“If you look at Casa Grande, they are having about 25 homes built a month; we are up around the 100 mark constantly,” Jepson said.
Photo by Joyce Hollis