Foreclosures continue to drive home sales in Surprise

Home sales in Surprise increased in August 2009 compared to a year ago, and a prime reason continues to be the number of foreclosed properties, a new study shows.

But overall median prices, which include traditional and foreclosed sales, plummeted from $170,000 in August 2008 to $131,000 in 2009.

As in Surprise, foreclosures throughout the West Valley continue to flood the marketplace, according to the latest Realty Studies report from the W. P. Carey School of Business at Arizona State University.

The study shows that more homes are being sold in the Valley now than a year ago, but the market is still inundated with foreclosure sales.

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 Surprise, of the 510 homes sold last month, 180 were foreclosures. There were 200 foreclosures in the city in August 2008. As it did a year ago, Glendale led West Valley cities with 230 foreclosures last month.

There were 50 properties foreclosed in El Mirage last month, and the median price for all sales was $73,250, down from $116,000 in August 2008.

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, the ASU study revealed. 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.