Live-in homebuyers necessary for a sustained resurgence, analysts say

The Phoenix area's troubled housing market was propped up by a number of factors in 2010, including the lowest interest rates in decades, seemingly insatiable investor demand and some of the most affordable home prices the market has ever seen.

But housing-market analysts said those factors alone would not be sufficient for long-term recovery to take hold.

What the market really needs, they say, is for the typical homebuyer to regain prominence as the biggest source of demand for residential properties.


"I think it (recovery) has to come from those who are buying a home to live in the home," said James "Bart" Patterson, CEO of Phoenix-based Clear Title Agency of Arizona.

As a title-insurance provider, Patterson said he had a rough idea of how much of the demand for local housing has been coming from investors compared with homeowner-occupants.

Lately the split has been about 50-50, he said.

A number of factors are preventing traditional buyers from dominating the market as they once did, Patterson and others said.

However, local real-estate professionals said they were seeing some new opportunities emerge for them, too.

Who is buying?

Traditional homebuyers tend to come from two groups: those new to the market, and those "moving up" in it, such as by purchasing a larger or more expensive home.

Move-up buyers have been largely out of commission in recent years, mostly because their homes have lost so much value that it would cost them money to sell.

However, it's possible that a portion of the absent move-up-buyer demand could be replaced by a third group: lower-income residents who can now afford to buy because homes are less expensive, Goodyear-based real-estate agent Sergio Polanco said.

But their opportunities have been limited severely by home investors, who have been competing aggressively for lower-priced homes, he said.

Polanco, a former teacher who specializes in affordable homes in the West Valley, brought a handful of clients recently to a home auction in Phoenix that did not allow investors to participate.

He described the auction as a rare opportunity for traditional buyers, whom he said have been all but shoved out of the affordable-home market by cash-paying investors.

"On a normal sale, you get outbid all the time," Polanco said.

Beating the investors

The auction was organized by BLB Resources, an asset-management firm based in Irvine, Calif., that has been charged with disposing of all foreclosed Arizona homes for which the former owners had U.S. Federal Housing Administration-backed loans.

Responsibility for reselling those homes falls to U.S. Department of Housing and Urban Development, which has a policy of giving traditional buyers at least 30 days to bid on new listings before opening them up to investors.

BLB Outreach Manager Ray Warda said there were several thousand HUD homes in the Phoenix area, and that it had been selling them via an online bidding process at hudhomestore.com.

The live auction, which featured 150 HUD homes and did not allow investors, was something of an experiment, Warda said.

It turned out to be phenomenally successful, attracting about 600 attendees, said Crystal Wright, spokeswoman for Phoenix-based auctioneer Hudson & Marshall, which conducted the auction on March 26 at the JW Marriott Desert Ridge Resort & Spa in Phoenix.

One of Polanco's clients, 23-year-old solar panel-installer Aldo Reyes of Phoenix, was the winning bidder on a three-bedroom, 2,700-square-foot home in Tolleson built in 2008.

Reyes' winning bid on the U.S. Housing and Urban Development-owned home was $82,500.

"I told all of my clients, this is a one-time opportunity," Polanco said, beaming, just after Reyes was declared the winning bidder.

'Shock and disbelief'

Phoenix resident Jacqueline Freeman, 39, was another winning bidder at the HUD auction. She ended up buying a stylish, two-story patio home in central Mesa for $72,500.

Freeman said she had wanted to move to Mesa because both of her jobs were located in that city - she teaches at Mesa Community College and works in the student-affairs department at A.T. Still University, a private medical college in Mesa.

Still, Freeman said she almost didn't go to the auction because of doubts that she really would be able to afford a home.

"I almost chickened out and didn't come," she said.

Like all participants in the auction, Freeman already had gotten pre-approval from a lender for an FHA-insured mortgage.

Despite having good credit and steady income, Freeman said she had not seriously considered buying a home, in part because she had heard stories of frustration from friends who had tried to buy foreclosed homes.

She said that when homes at the auction started selling, usually between $60,000 and $80,000, it was clear from the reactions of other attendees that they had been doubtful, too.

"We were all sitting there, looking at each other in shock and disbelief," she said.

Growth and jobs

Despite Reyes' and Freeman's traditional-buyer success stories, economists say the area's housing market won't recover fully unless Arizona's job opportunities and population grow again.

Based on those requirements, it could take longer than expected, according to University of Arizona economist Marshall Vest. Arizona lost nearly 300,000 jobs in the recession and hasn't begun to grow them back.

In his latest Arizona Economy Forecast, Vest discussed findings that Arizona's population actually has shrunk in recent years. The period from 2009 through 2012 might prove to be a period of zero growth for the state.

Vest said he revised his economic and population projections "significantly downward" this quarter as a result.

Vest and others, including Mike Orr, publisher of the Cromford Report, a daily update on the housing market, agreed that the tough job market and stricter immigration policies appear to have driven down the population in some heavily Hispanic areas, which they said could slow the housing market's recovery in those communities for years to come.

by J. Craig Anderson The Arizona Republic Apr. 3, 2011 12:00 AM





Live-in homebuyers necessary for a sustained resurgence, analysts say