Phoenix-area housing market shows signs of price stability

The Phoenix-area housing market is still stuck in the mud, but at least it's no longer sinking in quicksand.

That was the reaction of two local housing analysts to the latest S&P/Case-Shiller report on home prices in the nation's 20 largest metro areas.

The quarterly report, released Tuesday, said home prices double-dipped throughout much of the nation, reaching 2002 levels in March, based on the latest data available.

The report listed the Valley among the worst-performing areas in terms of median home-price change during the period from March 2010 to March 2011. The median sale price on an existing home in metro Phoenix decreased 8.4 percent, second only to Minneapolis, which had a 10 percent decline, the report said.

However, the Phoenix area was one of the best performers with regard to the most recent month-over-month price change measured by the Case-Shiller study, from February to March. The Valley's median home-resale price decreased 0.5 percent during that one-month period, making it the fifth-best metro area in terms of price retention.

The Phoenix area's recent performance boost in home-value retention reflects that prices have essentially stabilized since January, local analysts said, following an artificial price increase and subsequent decline caused by the introduction and expiration of an $8,000 federal income-tax rebate for first-time homebuyers.

Aside from the tax rebate's temporary effects, the Phoenix area's median home price has been stable, albeit low, for quite some time, said analyst Tom Ruff, founder and principal of the Information Market, based in Glendale.

5-month standstill

"It's barely moved in two years," he said.

In April 2009, the median home-resale price in Maricopa County reached its first post-bubble low point of $119,000, Ruff said.

After rebounding to a high of nearly $135,000 in April 2010 - the final month for buyers to qualify for the tax rebate - prices once again fell, reaching a new low of $115,000 in January.

According to the Information Market's research, the figure hasn't budged from that spot in five months.

Meanwhile, some national housing analysts, reacting to Tuesday's report, predicted home prices nationally will decline by an additional 5 percent by the end of the year.

Ruff took issue with that prediction for the Valley, arguing that, for the past few months, newly issued notices of foreclosure have decreased significantly in the area, bringing the number of "active" notices - those yet to be resolved by foreclosure, short sale or loan modification - from 40,000 in January down to 27,000 in April.

Predicting an uptick

Because foreclosure homes generally sell at a discount and there are likely to be fewer of them in the coming months, Ruff is predicting a slight uptick in the area's median home-resale price.

One reason the Valley might be pulling away from other metro areas in terms of price stability is the ease with which lenders can foreclose on homes in Arizona, Ruff said.

In many other states, banks cannot foreclose without going to court, he said, where it's possible for borrowers and their attorneys to drag out the process much longer.

'A faster track'

"We think Arizona is on a faster track to recover than some of the other states," Ruff said.

Jay Butler, an Arizona State University housing-market analyst, was less optimistic, saying it's still a toss-up whether home prices in the Phoenix area will go up or down from here.

One expected change that could seriously affect Valley home values is the slashing of maximum mortgage-loan limits backed by Fannie Mae, Freddie Mac and the Federal Housing Administration, Butler said.

The conforming loan limit for Fannie and Freddie loans in the Phoenix area is $417,000, and the FHA loan limit is about $350,000.

Serious challenges

Butler, director of real-estate studies at ASU's W.P. Carey School of Business, said that Fannie and Freddie officials are talking about lowering the limit to $200,000 for conventional loans and that the FHA is considering a reduction to $150,000 for the loans it guarantees.

Butler also pointed out that Arizona still faces serious employment challenges and that population growth has slowed to a trickle.

"The only thing going on right now is investors buying homes for as little as they can get them for," he said. "There's nothing really out there to propel the market forward."

by J. Craig Anderson The Arizona Republic Jun. 1, 2011 12:00 AM





Phoenix-area housing market shows signs of price stability