The Arizona Republic October 2006
Home prices are a touchy subject in the Valley.
People aren't bragging about how much their home appreciated in a single month. There are no bidding wars for homes. No one is talking about how they're going to spend their equity.
No, homeowners today are watching every sale in their neighborhood, cringing if they see "For Sale" signs lingering too long and losing their tempers when neighbors drop prices.
Some have cause to be anxious. An Arizona Republic survey shows:
• Most Valley neighborhoods saw home values peak by May or June.
• Housing prices dipped in more than half of all ZIP codes in metropolitan Phoenix during July and August.
• Several areas saw significant monthly drops of 10 percent or more.
• There are some areas where home prices continue to climb, but the appreciation is not enough to inspire the euphoria that last year's 50 percent or more increases did.
Homes near central Phoenix, Tempe and south Scottsdale are holding their value or gaining, unlike those in many suburban neighborhoods, where homebuilders are undercutting the used-home market by offering big incentives to sell houses.
"The housing market hasn't cooled as much in central Valley neighborhoods," said P.J. Dean, a real estate agent with Dean-Maldonado. "But if you are trying to sell a home in Surprise now, good luck, because that's where speculators snatched up homes, and builders are offering the best deals."
In the Surprise ZIP code of 85374, home prices hit a low for the year in August. Home prices in the Buckeye ZIP 85396 hit a high in February and have yo-yoing since. In the Gilbert ZIP 85297 prices have been falling since June. In the north Valley, prices in Anthem fell to a 2006 low in August.
"Most people who bought on the fringes last year are likely going to have to hold on for at least three years or sell for a loss," said real estate agent Margie O'Campo de Castillo of Phoenix-based Arizona Dream Realty.
Prices go up and down In January, when the Valley's housing market started to come down from last year's wild run-ups, about one-third of metro Phoenix's ZIP codes experienced small price dips. Now it's more than half.
"The Valley's housing market is going through a definite and obvious correction," said O'Campo de Castillo. "Homes are selling, but they have to be priced right. No one is paying last year's inflated prices."
The Valley's price dips are a result of supply and demand. There are 45,000 homes on the market across the metro Phoenix now, compared to fewer than 20,000 last October.
Housing analysts say when the Valley's supply of homes for sale drops below 35,000, the market will have rebounded or be close to it.
The number of listings has stopped climbing by 2,000 to 3,000 a month and was almost flat in September. That's a good sign because it shows the biggest dips for the Valley's housing market could be behind it.
During 2005, a slew of mostly out-of-state investors buying multiple homes artificially drove up demand. Bidding wars sparked by those investors worked to push up home prices 50 percent in a year, something housing analysts say hurt the real estate market more than it helped.
Prices in some areas of the market have dipped more than others. And while most parts of the Valley saw their prices peak this summer, values in some areas are still climbing.
Home prices in Laveen, ZIP code 85043, and Glendale's ZIP 85302 peaked in August. In the Central Phoenix ZIP 85006, housing prices hit a high during August. In Phoenix's 85018 ZIP, home prices dipped in May, June and July, then rebounded in August.
But the north Phoenix 85050 ZIP code has seen its median home price go up and down since January for a 14 percent drop so far in 2006. In the Mesa ZIP 85208, home prices had been climbing since January but hit a low for the year in August. In the El Mirage ZIP of 85335, prices had steadily climbed since January to a high in July; in August, they fell back to January's level.
The downward trend in many of these areas likely continued in September because the overall figure for a Valley resale dipped again last month. September figures for Valley's ZIP codes aren't yet available.
But the Valley's median used home price fell to $256,900 last month, down from $263,000 in September 2005. It hit a record $267,000 in June.
"The Valley's housing market is returning to normal. After last year's inflated home price run-ups, that means many areas will see prices drop," said Jay Butler, director of the Arizona Real Estate Center at Arizona State University's Polytechnic. "Some areas of the Valley will feel the correction more than others."
Rebound could be slow Valley home prices aren't expected to dip much lower, but everyone is watching all signs to see if it's done slowing. Some Valley homeowners are getting more motivated about selling, which could boost sales.
"More sellers are starting to see last year's market is not today's market and are offering buyers concessions," said Jay Luber, vice president of First Horizon Home Loans of Phoenix. "There are sellers now who are now giving buyers time to sell their other house."
The Valley, more than other parts of the country, could feel the pain of the housing slowdown. Year-over-year U.S. existing home prices recently fell for the first time in 11 years.
But the Valley has something going for it that other parts of the country don't - strong job and population growth. Housing analysts say the market could rebound by mid-2007.
"There are still more people moving into the Valley than moving out, thanks to our local economy," said Crocker Liu, the McCord Chair in Real Estate at ASU's W.P. Carey School of Business. "Short term, I expect a market correction. Over the longer term, I expect the housing market to rebound, but to more rational levels than the recent past."
