As the foreclosure crisis nationwide worsened during 2007, many states saw their inventories of foreclosures reach new heights, and Arizona, which has long been one of the states most troubled by the foreclosure surge, was no exception.
Arizona ranked eighth in the United States for total number of foreclosures during 2007, with more than 70,000 properties registering for default or entering into some stage of foreclosure. What’s truly telling about this statistic however is that this accounts for roughly 1.5% of all of the homes in the state. Many other states in the top 10, such as Florida, California and Texas, have much higher populations and population densities than Arizona. What’s more is that this total for the year represents a 150% increase over the statistics for 2006.
Arizona has long been plagued by the foreclosure problem, due largely in part to the overwhelming presence of sub-prime, adjustable rate mortgages. In the past decade, Arizona has experienced significant economic growth, especially in its capital city, Phoenix. The growth of industry, jobs and population, coupled with the low federal interest rates and rampant buying up of real estate in the rest of the country spurred many investors to try to cash in on the state’s growing popularity. The low interest rates also allowed many potential homeowners to realize their dreams, since mortgage companies started offering low initial cost sub prime mortgage at outrageous values.
However, once the bubble burst, investors and low income homeowners alike found themselves hanging on to properties they could not afford, and could not sell to get out of the situation. As property values fell across the state, investors could not sell of their homes for anywhere near the amount of the mortgage loan for which they paid. Therefore, it became easier to let homes go into foreclosure than keep up the adjusting monthly payments. For homeowners, their supposedly cheap, manageable sub prime loans turned into adjustable rate nightmares. Unable to keep up with soaring monthly payments, many of these properties also went into foreclosure.
And 2008 is only primed to get worse. Nationwide, foreclosure filings in December of 2007 were up more than 90%, a figure that is unusual for the holiday season. Arizona saw such heavy investment that the market is still far from bottoming out. Residents and state officials alike are hoping that the state’s desirability and growing economy will keep the market from fully collapsing and causing an economic nightmare, but it remains to be seen whether this is a realistic presumption or not. For now, you can count on many more foreclosures popping up in Arizona over the next year.
However, this could mean an opportunity for homeowners or investors as well. The wealth of foreclosure properties has meant a wealth of foreclosure sales, and buying great homes in cities like Tucson, Flagstaff or Scottsdale could be a great investment down the line. Many foreclosure properties in Arizona are going for anywhere between 10 and 60% below their estimated market value. It could be a good year to watch foreclosure sale prices hit rock bottom, and then buy property with a stable mortgage. This way, once the market rights itself, you stand to profit a great deal once home values start to come back up.
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