Housing market still uncertain

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“Foreclosure activity differs throughout the Valley,” said Jay Butler, director of Realty Studies in the Morrison School of Management and Agribusiness at Arizona State University Polytechnic campus. “For example, it was 56 percent in Avondale, 23 percent in Tempe and 41 percent in Mesa. The declining prices have fueled renewed investor interest and potential owner-occupants, especially in the lower-income ranges.”

Investment interest is being driven by the anticipation that home prices will rise again in the next few years. The lower median price is being impacted by several forces including the large number of vacant homes, especially in certain neighborhoods. Further, capital is available for lower-priced housing, but lacking in the higher priced housing market.

While lower prices can greatly improve affordability, they can adversely impact many owners and potential sellers who are watching their limited equity erode, as prices decline to and even below existing debt level. Thus, lower prices affect the ability and desire to continue owning the home and even overall confidence in the economy, which puts additional strain on the local housing market.

“There is heightening expectation that the recent takeover of the Federal National Mortgage Assoc. and the Federal Home Loan Mortgage Corp. by the federal government will bring much needed confidence and stability to the housing and financial markets,” said Butler.

“One expected result of the takeover is that mortgage interest rates will move lower providing some incentive for potential buyers. However, most potential buyers still confront a weak economy, slumping levels of confidence and tighter underwriting guidelines. Thus, the local housing market still contains considerable uncertainty over when any potential strengthening can be expected,” Butler said.

Dr. Jay Q. Butler, may be reached at (480) 727-1300 or e-mail him at [email protected].

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