In this state better known for being a desert oasis than any where else in the country, housing markets are scrambling to recover from some of the worst deflation in the nation. Despite areas experiencing multiple offers on lower-priced bank owned properties, the Arizona housing market is far from being at the bottom.
Rising sales of bank owned single family homes are igniting part of the Phoenix real estate market as buyers compete with multiple offers to get the best deal possible. But while the low-end is experiencing a robust run in sales due to lower prices, near record low mortgage rates and the $8,000 federal tax credit the higher end of the market is still staggering.
Phoenix has been suffering through the housing depression in one of the worst crashes in the country. After recording the highest median price in the nation during the real estate boom, Phoenix has now seen that cut in half and has one of the highest foreclosure rates in the country.
The collapse has been devastating for the market, which saw record growth during the boom as the second highest subprime lending market in the country. Business failures are rising and unemployment is increasing. Homes priced above $250,000 will have to drop significantly before the higher priced market will be re-charged.
Deflation is forecast to hit 25.9% for the year on the average home in Phoenix, sending more than 40% of all homes in the city to being under water or worth less than what they could sell for in today's market. Another round of foreclosures will send prices lower. However, it isn't all bad news in Phoenix. First time home buyers and investors are flocking to the Valley of the Sun.
In Scottsdale the market is beginning to show encouraging signs with higher home sales, despite being the most expensive area to purchase a home in the Greater Phoenix Metropolitan area. Scottsdale was hurt by the stock market crash and as a result foreclosures increased.
 |
| City |
Forecast |
| Phoenix |
− 25.9% |
| Flagstaff |
− 11.8% |
| Tucson |
− 12.8% |
| Scottsdale |
− 17.8% |
| Yuma |
− 12.7% |
Home values will remain on a downward slide through the year. Foreclosures added to deflation as Scottsdale became a place for high-end foreclosure parties for those too depressed about losing their homes to do anything else. Housing Predictor forecasts Scottsdale average home prices to deflate 17.8% in 2009.
In Tucson multiple offers are also becoming more common on lower priced properties as the inventory of homes for sale drops, an encouraging sign for the marketplace. However, overall home sales remain slow since many homeowners are either stubborn about cutting their selling prices or are unable to drop their asking prices since they paid more for the property that what it could fetch in today's market.
New homes in Tucson sit vacant since Tucson was also over-built during the boom like Phoenix. Home values are forecast to deflate 12.8% in 2009 on average. The pent up demand for homes in Tucson should stimulate the market in the second half of the year.
In Flagstaff only dozens of homes sell monthly as values deflate in this mountain high community. For owners the deflationary cycle can be discouraging, if not downright frightening as the federal government tries to get a handle on the nation's housing mess. Job losses, business failures and tight credit markets combine to nearly freeze the housing market.
The second home market provided a sort of safety net for Flagstaff before the housing crash, but vacation home buyers have all but vanished in Flagstaff, which is projected to see average home values deflate 11.8% in 2009.
In Yuma the foreclosure epidemic is making a grueling impact on a community that was once strengthened by the military. Foreclosures are climbing and are sending housing values much lower. The credit crunch will have a long lasting impact on Yuma forecast to deflate another 12.7% by year's end.
