A new report suggests there are too many Arizonans chasing too few affordable homes in the state.

The study by the Federal Housing Finance Agency finds the price of an average home in the state that sold in the first three months of the year up by nearly 2.5 percent in the last quarter. That was good enough to far exceed the national average of just a half a percent.

And that, in turn, is eating into the losses posted in the last five years.

But when the report adds in appraisals done on homes for refinancing mortgages, a different picture emerges: Overall home values are still dropping.

Put another way, homeowners who are getting new loans are seeing appraisal reports that show their properties are worth less now than a year ago. But anyone in the purchasing market needs to be prepared to shell out more.

Economist Michael Orr of the W.P. Carey School of Business at Arizona State University said one factor is simple supply and demand.

“We’ve got only a tiny fraction of normal listings of what we would normally have at this time of year,” he said. “At the same time, people who have relied on banks listing homes are realizing the banks haven’t got many homes because they’re not foreclosing on very many.”

Orr said his own analysis of the Arizona housing market, which relies on Multiple Listing Service data, is showing a sharp upswing in the price of homes being sold.

That still leaves the other half of the equation: the drop in what appraisers think homes being refinanced are worth.

Orr also said appraisers are being conservative in their reports.

“All they need to do is come up with a number that justifies the loan,” Orr continued. He said appraisers are not particularly interested in providing a figure that represents the current state of the market.

In fact, he said, they really cannot represent the current market because the “comps” they use — data on values of comparable homes that are selling — is pretty much three months out of date.

But Orr there’s another factor at work.

“They are under pressure to guess low,” he said. Orr said the lenders were stung when the appraisals done at the top of the market proved to be much higher than they could recoup when the buyers defaulted and the homes were sold in foreclosure.

And that makes a big difference in Arizona where home buyers are generally not liable for the difference between what the home brought at auction and the amount outstanding on the mortgage.

Andrew Leventis, principal economist for the FHFA, said he also believes that the figures may represent “appraisal conservatism.”

But Leventis said those lower numbers on the appraisal side of the equation also may reflect some unique aspects of what is happening in the market. The key there, he said, are the newaffordable refinancing programs.

“We may be seeing appraisals from parts of Arizona that may have suffered more, and are just showing more weakness than the rest of the market,” Leventis explained. He said a glut of appraisals from these distressed neighborhoods will bring down the overall average.

Even with the boost in sales prices, the Arizona market still has a long way to go. Those current sales prices are still only slightly more than half of what they were five years ago.


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