Friday, March 28, 2008

Under $200,000 market gives home sales a push

Under $200,000 market gives home sales a push
By Kerry Fehr-Snyder The Arizona Republic

The real-estate slump has an upside for first-time home buyers looking to spend $200,000 or less.

As median-home prices continue dropping, the supply of homes for sale in the much-coveted low-end market is swelling.

Consider Marshall and Wendy Kauffman,who recently picked up the keys to their first home: a 1,150-square-foot three-bedroom, two-bath house in a nice Gilbert neighborhood. They paid $185,000.

The Kauffmans, who are both 29 and have three children, are among home buyers fighting over a growing inventory of homes in the Valley's sub-$200,000 market. The subprime debacle, foreclosures and "short sales" in which a buyer offers less than what is owed the bank, continue to drive Valley real-estate prices down. That, in turn, makes more homes than ever affordable for first-time home buyers and investors.

But those who want to get the deals face:

• Competition from investors.

• Bidding wars on "short-sale" homes with multiple offers.

• Waiting games for lenders to respond to "short-sale" offers.

"We saw a house that we liked, but it needed a lot of work," Wendy Kauffman said. "It had eight offers on it. It was a short sale, and there was a bidding war on it."

The Kauffmans found their dream home relatively quickly by limiting how far out they were willing to look. They also disregarded short-sale and foreclosure homes, said Audrey Hickman, the Kauffman's real-estate agent at WestUSA Realty.

Wendy Kauffman described their house hunt as "a wonderful experience."

"But the key was having people on your side, from Audrey to our mortgage broker," she said.

The other key was not having to sell another home first. The couple have been renting a 1,460-square-foot, three-bedroom, two-bath home in Ahwatukee.

Homes that sold for less than $200,000 grew to 34 percent of the market in January, up from 16 percent of the market in January 2007, according to Jay Butler, director of Realty Studies at the Morrison School of Management and Agribusiness at Arizona State University 's Polytechnic campus.

Butler 's data doesn't break down where the less-expensive homes are selling or how many of the buyers are investors.

Real-estate agents and brokers said they see a growing number of homes listed for sale for $200,000.

"I'm working with a handful of buyers under $200,000, and I'm not having trouble finding them properties," said April Starr, a broker for All Starr Property in Phoenix . "It's the lenders who are making these people jump through hoops and then jump through them again."

Of the 46,148 single-family homes listed for sale in Maricopa County as of Thursday, about one-quarter of them are priced at $200,000 or less, Starr said.

Linda Booker, a real-estate agent with Realty Executives' Arrowhead branch, said the under-$200,000 market is a sweet spot for first-time buyers and investors.

"There's a decline in property values, and it's what's affordable for people to purchase," she said.

Several real-estate agents said many of the buyers in this market are investors.

Also, Dave Green of Century 21 Arizona Foothills said many of the homes listed for $200,000 or less tend to be in far-flung areas of the Valley, such as Queen Creek or Maricopa. Those closer to metro Phoenix often rise above the $200,000 mark.

Bradley Crutchfield, an assistant technician at the Gila River Indian Casino and a part-time ASU student, said he paid $243,900 for his first house, a foreclosure near Clemente Ranch in Chandler .

"It was in the (price) range of what I was looking for, but it was my top end and I was only willing to pay that if I could be closer," Crutchfield, 23, said. "I've been looking for about two years now when the market was really high, and I had the urge to buy. Then the market went down, and I seriously wanted to buy."

Crutchfield and his real-estate agent, Sonia Carver of Keller Williams Realty East Valley , said they also found themselves competing with investors.

"The sub-$200,000 market is superhot," Carver said.

Shawn and Charlene McNeely, who live in Mesa , jumped into the low-end market to generate retirement income. They have bought three homes, ranging in price from $200,000 to $220,000, with the help of real-estate agent Marie Nowicki of Re/Max Elite in the past six months. Two of the homes are in Gilbert, and one is in Chandler .

One of the Gilbert homes was owned by a 65-year-old woman whose 95-year-old mother has Alzheimer's disease and lives with her. The women were about to lose their home because they couldn't keep up with their mortgage payments, which ballooned to $3,000 a month on an adjustable-rate loan.

The McNeelys said they now rent the home back to the women for $1,200 a month.

"She was very happy because for months, she was in fear of losing her home and being displaced," Shawn McNeely said. "Unfortunately, somebody's misfortune becomes somebody else's opportunity."

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