Double dip is looming for Phoenix home prices

Source: The Arizona Republic

Metro Phoenix home prices are headed for a new low, if they haven't already hit it.

Median prices for the sale of existing homes have been falling since June, when a federal homebuyer tax credit expired and an increase in foreclosures helped drive down prices that had been steady for nearly a year.

A new low would create a double dip in a market that has already been on a harrowing ride.

Prices rose to about $250,000 during the boom of 2004-06 and then collapsed amid a mortgage crisis and an economic recession. They bottomed out at $119,900 in April 2009, according to the Information Market, a real-estate research firm.

Home prices ticked up after that, and the median hovered around $130,000 until last summer. Then, they fell again.

At the end of November, Phoenix's median resale-home price hit $121,500, the lowest it has been since April 2009. The median price measures single-family home sales as well as condominiums.

A median price below $119,900, the previous low, would constitute what observers call a double dip, and some measures of home prices signal that is already here:

- The Arizona Regional Multiple Listing Service, a database run for real-estate agents showing homes for sale and the prices they sell for, analyzes pending purchase agreements scheduled to close in a given month and creates an index predicting future sales prices. That index shows the median home price falling to $115,000 in December.
- Housing analyst Mike Orr, publisher of the "Cromford Report," tracks Phoenix-area home sales by price per square foot. His analysis showed the median per-square-foot price for a home sold in the region fell to $82.10 in October, the same level it was in April 2009. The price has been bumping along at $82 to $83 since then.

Orr says this dip won't be nearly as dramatic as the previous decline.

"The sharp relapse (of home prices) fueled by the end of the tax credit is now over," Orr said. "I expect a long, slow recovery in 2011."

Future declines
Hopes for a recovery in metro Phoenix's housing market began in April of last year.

But although prices rose some and then remained steady, the end of summer 2010 made it clear that the homebuyer tax credit had been propping up the market. The credit expired in June.

During the past two months, foreclosures fell, but the decline was likely only temporary. Bank of America had placed a moratorium on foreclosures because of questions over its record-keeping. That freeze expired last week, and Phoenix-area foreclosures could climb by at least 1,000 a month through the spring as BofA restarts its process.

A large increase in the number of foreclosure homes for sale could put more downward pressure on prices because lenders are selling these homes for bargain prices.

Recovery
There are positive indicators for metro Phoenix's housing market.

Investors continue to buy many of the region's foreclosure homes, keeping the supply of lower-priced houses from soaring. The job market is slowly improving, and although mortgage rates climbed in the past week, they are still lower than a year ago. Pending sales show home prices ticking up slightly in January.

The Arizona Regional Multiple Listing Service's figures forecast the Valley's median home price climbing from $115,000 this month to $118,000 in January.

Housing-market watchers say foreclosures could begin to level off and even drop next summer if the job market continues to improve, more loan modifications and short sales are successful, and BofA's excess-foreclosure inventory works its way through the process.

"Future declines in metro Phoenix home prices will be modest, more of a slip than a plunge," said Tom Ruff, an Information Market analyst. "The big drops are behind the market."

URL to original article: http://www.housingwire.com/2010/12/21/double-dip-is-looming-for-phoenix-home-prices