Valley home prices continue to flatten

Existing home prices across the Valley continue to slowly improve each month despite the prevalence of foreclosures, according to the latest Arizona State University-Repeat Sales Index.

Valley house prices declined by 25 percent between August 2008 and August 2009. However, that's less than the 28 percent drop from July 2008 to 2009, and the 31 percent drop from June to June. The index measures changes in average home prices from year to year.

Among East Valley cities, the August to August drop was 17.6 percent in Chandler, 17.8 percent in Gilbert and 27.4 percent in Mesa.

"Since the most rapid declines back in February and March, the index has been declining at a slower rate each month," said Karl Guntermann, a real estate professor in the W.P. Carey School of Business at ASU. "The local housing market is regaining some measure of stability."

From July to August, the Valley median price increased from $125,000 to $126,500. Among East Valley cities, the median price increased in Chandler and Gilbert but fell in Mesa.

Investors buying foreclosed homes and first-time homebuyers taking advantage of the federal tax credit are pushing up prices, Guntermann said. The large number of foreclosures likely to hit the market next year makes it difficult to predict the direction of existing home prices with any certainty, he said.

Preliminary index estimates show continued good news for now, with a 23 percent drop from September 2008 to September 2009 and a 20 percent decline from October to October. The lower-priced end of the market is still suffering more than the higher end.

The overall index has now declined for a record 30 months in a row. Annual drop rates vary widely across different regions of the Valley, but that spread is starting to get smaller. Prices have dropped by more than 50 percent in Mesa, Glendale and Peoria since their peak in 2006. All other Valley cities have experienced declines of more than 30 percent.

New figures released Tuesday from the Federal Housing Finance Administration showed a bleaker picture. Prices across the nation are beginning to recover, but not in Arizona, the agency said.

It found the price of the average home sold in the United States rose more than 2 percent between the second and third quarters of this year. That's the first time there has been an increase in more than two years.

But the figures for Arizona were more dismal, with the average home price dropping by more than 2 percent. Those new losses now put the year-over-year drop in excess of 17 percent.

That means a home valued at $200,000 last year now is worth $34,260 less.

Only Nevada posted a larger decline.

Still, the news could have been worse.

The decline between the first and second quarters in Arizona was nearly 6.5 percent. And home prices in the state dropped about 6 percent between the second and third quarters of 2008.

But even with the positive numbers on the national level, the acting head of the Federal Housing Finance Agency, which tracks these figures, was not predicting an end to the housing slump.

"These data provide some evidence of a short-term stabilization in housing prices," Edward DeMarco said in a prepared statement.

"Given the headwinds facing markets, including high unemployment rates and continued high levels of delinquency and foreclosures, the longer-term view remains uncertain."

The FHFA figures are significant because the agency computes its index based on figures from Fannie Mae and Freddie Mac which have the largest database of conventional mortgages going back 34 years.

That allows the agency to track prices on the same home being sold and resold. By contrast, some other indexes are based solely on whatever happens to be sold during that period.

At a local level, the agency uses an even broader base to determine actual changes in home values, considering not only home sales but also the appraisals when owners refinance their houses.

That index found home values in the Phoenix metro area, which includes Maricopa and Pinal counties, down 5.5 percent in the last quarter and nearly 16.9 percent lower than a year earlier.

Capitol Media Services contributed to this report