Metropolitan Phoenix, like many of its sunbelt neighbors, is showing consistent improvement in its residential housing market in terms of total inventory, percent of distressed properties, and pricing. Team Toci brings to light two significant reasons why:
Reason No. 1: Arizona is a Non-Judicial Foreclosure State. In Arizona a Deed of Trust allows for a non-judicial foreclosure. Generally, there is a Power of Sale clause in the Deed of Trust which pre-authorizes the sale of the property to pay off the balance should a default occur, thereby avoiding intervention of the courts. This process typically takes 90 days as opposed to judicial foreclosure states like New York, New Jersey, Maine, Florida, Illinois, and Maryland where the timeline can take up to 3 years. Many of these states are also still experiencing pricing declines due to the lengthy process through their court systems.
Reason No. 2: Non-Deficiency Judgments. In Arizona, a lender may NOT bring a deficiency suit against a person who lost a single-family residence under 2.5 acres. When the homeowner loses their home they simply walk away and have no further burden other than a decreased credit score.
These two reasons are the primary catalysts behind the steep pricing decline of 55% from 2006 to 2011. In Arizona, most of the subprime loans were flushed early creating a very sharp and painful recovery. This correction reversed course in May 2011 with the median list price increasing 20% during a 10-month period, a reflection of metro Phoenix’s housing shortage and newfound affordability. By economist’s metrics, a “healthy” metropolitan Phoenix should carry ±35,000 homes in its inventory. With less than 21,000 homes on the market today, a 30% shortage of housing inventory has put needed upward pressure on home values.