Phoenix celebrates long-awaited housing price recovery

Metro-Phoenix celebrates long-awaited housing price recovery

Valley homeowners are breathing a collective sigh of relief as the area’s median home price sailed past the city’s previous record set back in 2006, according to new data from the Arizona Regional Multiple Listing Service.

Metro-Phoenix home prices

The previous median price record, set in June 2006, was around $265,000, the ARMLS research shows. But the deceptively lucrative housing bubble burst under the weight of its own petard in 2007 with the Great Recession. By September 2011, home prices in the Phoenix market had plunged to about $120,000.

Despite the welcome news, housing analysts aren’t ready to start popping Champaign corks in celebration just yet. They’re still shellshocked from the bust that took more than 10  painful years to turn around.

To accurately conclude that Phoenix’s market has reached the pinnacle of recovery, housing analyst Mike Orr, the founder of the Ruff and Cromford Report, analyzed pending sales, foreclosures, and other key indicators to identify the metro Phoenix housing market’s lowest and highest points, calling the period between 2005 and today “a long and often unpleasant ride.”

For Phoenix-area homeowners who’ve managed to navigate the tumultuous waters over the past 15 years, the recovery of home prices is a long-awaited harbor. For the droves of new settlers to the Valley, the path from peak home prices in 2006 to financial ruin by 2012 should be a lesson for the ages.

Before the bubble burst, a run-up in housing prices fueled by demand, speculation, easy-to-get mortgage loans, and enthusiasm for rapidly rising home values was like a ticking time bomb. Speculators appeared in the market which further drove demand. As should have been expected according to the laws of supply-and-demand, there came a time when supply was up while demand diminished, and home prices took a nosedive.

In addition to speculators, lenders backed by Wall Street were selling bad loans  with exorbitant fees attached. By the time reality hit, mortgage loans had been doled out to millions of people, many of whom should not have qualified for a home loan to begin with, and many more mortgaged homes they couldn’t afford. They were sold on the investment potential by the profuse reassurances of questionable mortgage brokers and lending institutions. Foreclosures in metro Phoenix escalated from about 100 in 2006 to 4,500 in 2011. 

More than half of the area’s homeowners were becoming buried in debt, a situation compounded by the discovery that they actually owed more on their home than it was worth–and the bubble burst.

Government-backed loan modifications weren’t available to homeowners who found themselves getting deeper and deeper underwater, while to their outrage Wall Street and banks received government bailouts, although many argue that without those bailouts, the country’s financial infrastructure would have collapsed. At the time, national housing analysts predicted a 20 to 25 year recovery period for Valley home prices. 

Thankfully, they were wrong.

Today, Valley home foreclosures are down to less than 150 per month. Fewer than 5 percent of all Phoenix-area homeowners are insolvent or unable to meet their financial obligations. Oh, what a difference a little more than a decade makes!

Additionally, Valley home prices have returned to their peak, not because of the speculative market and shoddy oversight by government regulators that caused home prices to shoot up 50 percent in a year, as they did between 2005 and 2006.

While many who lived through the crash may feel edgy when they see Phoenix-area home prices rising up and up and buyer demand for homes spark bidding wars routinely, Phoenix has experienced a steady rise of between 5 percent and 8 percent annually for several years now.

 The contrasts between 2005-2006 and today are night and day. Metro-Phoenix’s home market in 2018 is made up of primarily affordable homes priced below $400,000 in popular neighborhoods. While that isn’t great news for prospective homebuyers looking to buy an affordable house, the forecast for home prices to maintain their steady pace provides a positive outlook for the market over the next year at least.  

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Phoenix home prices recovery

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