Home price decline keeps Arizona in the bottom nationally - East Valley Tribune: Arizona

Home price decline keeps Arizona in the bottom nationally

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Posted: Wednesday, August 24, 2011 4:57 pm | Updated: 12:37 am, Fri Sep 30, 2011.

The state’s housing market continues to search for a bottom, with new figures Wednesday showing the average Arizona home now selling for only about half of what it did five years earlier.

In its quarterly report, the Federal Housing Finance Agency said the purchase price of homes that it had previously tracked dropped nearly 4.6 percent between the first and second quarters of this year. That sent the year-over-year decline to 14.9 percent.

No state did worse on an annual basis.

By comparison, the decline in the last year nationwide, on average, was 5.9 percent.

Jay Butler, professor emeritus at the W.P. Carey School of Business at Arizona State University, said there are a variety of reasons for the continued plunge. But he put the situation in decidedly non-economist words:

“Right now, it sucks,” he said.

The picture is pretty much reflected in statistics for the key metropolitan areas around the state where the agency tracks not only housing prices but the actual value of homes.

It can do that because it keeps track of not only sales prices of the same homes from prior years but also refinancing data. That provides a broader picture of what homes are worth whether they are actually being sold or not.

That data show that four of the state’s metro areas are among the 20 worst for year-over-year declines in housing values of the more than 300 communities monitored across the nation.

The Phoenix metro area, which includes both Maricopa and Pinal counties, logged a 15 percent annual decline, followed by a 12.9 percent drop for Yavapai County, 11.3 percent decline in Pima County and nearly 11 percent in Yuma County.

Elsewhere, there was an 8 percent drop in home prices in Coconino County since the same time last year and an 8.5 percent decline in Mohave County.

Marshall Vest, economist at the Eller College of Management at the University of Arizona, said there won’t be a turnaround in the trend until the “fundamentals” of the housing market get better. That starts will trying to absorb the excess supply of homes.

“We have enough vacant houses here in the state of Arizona to accommodate an entire decade worth of population growth,’’ he said. “And that’s if the population were growing.”

Vest said that’s linked to larger national problems.

“Mobility is near zero,” he said. “People are frozen in their houses,” unable to sell them, at least at a price where they would be able to pack up and move to Arizona.

Butler said one reason prices continue to plummet relates to what people are buying.

“The only thing that’s being sold right now are investment properties: rentals and cheap properties,” he said.

“That just keeps the lid on any appreciation (and) keeps on forcing prices down even further,” Butler continued. “And there’s no pent-up demand at the moment for a move-up market so there’s nothing to accelerate any appreciation.”

Vest agreed.

“We have a high proportion of distressed sales in the market,” he said. “That’s going to continue to put downward pressure on prices.”

And Vest said while the number of homes being sold in foreclosure — and at foreclosure prices — is declining a bit, “there seems to be a lot of houses still in the pipeline.”

Butler said prices will not pick up until other elements of the economy recover, including the job market.

“And that is the big unknown,” Butler said.

“We are not getting job growth,” he explained. “Even people who have jobs don’t get income growth.”

And Butler said that all the negative news about the national debt and other issues has knocked the wind out of consumer confidence.

“The environment for the housing market really has to improve before the housing market even begins to improve,” he said.

Home price appreciation:

Area Last quarter Year over year 5 years ago
U.S.* -0.60% -5.90% -18.80%
Arizona* -4.60% -14.90% -49.50%
Coconino+ -1.90% -8.00% -28.80%
Maricopa&Pinal+ -7.20% -15.00% -49.40%
Mohave+ -4.10% -8.50% -46.00%
Pima+ -4.00% -11.30% -34.10%
Yavapai+ -6.50% -12.90% -42.00%
Yuma+ -4.10% -11.00% -35.10%

Note: Negative numbers in parentheses

* Purchase price comparison only

+ Purchase price and refinancings

Source: Federal Housing Finance Agency

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