Market still flooded with foreclosure sales

More homes are being sold in the Valley now than a year ago, but the market is still flooded with foreclosure sales, according to the latest Realty Studies report from the W. P. Carey School of Business at Arizona State University.

One out of every three sales of an existing home in the Valley was part of a foreclosure proceeding during August, the report said.

While that is down from 44 percent of the total in the same month a year ago, it is still far higher than the 3 to 5 percent in a normal market, said Jay Butler, associate professor of real estate, who compiled the report.

"A recovery cannot really be established until foreclosure activity drops to historical levels, which would be about one foreclosure for every 20 regular home resales," he said. "Owner-occupants will have to become the primary driving force again. Right now the market is driven by investors looking for a deal and the potential of great appreciation."

In that respect, the current market isn’t much different from the hyper-market of 2003-2006, which was driven by similar-minded investors looking for a deal with the potential for great appreciation, he said.

About 6,000 Valley homes were resold and about 3,100 foreclosed on in August this year, amounting to about 34 percent of total resales. That compares with 4,300 resales and about 3,300 foreclosures — 44 percent of the total — in the same month a year ago.

But the percentage for foreclosure sales is somewhat misleading because about half of traditional sales in August were by lenders selling residences they had previously acquired through foreclosure, Butler said. Thus about 67 percent of total recorded sales in August was related to foreclosure activity in some manner, he said.