Vinnys House of Real Estate

When will the housing market hit bottom, and how long will it take to get there?

The answer is clear: It depends on where you live.

The Valley’s housing slump is really a collection of highly localized downturns, each following its own timeline and trajectory, according to analysis of 2008 Valley Home Values data compiled by the Information Market for The Arizona Republic.

While the market pressures bearing down on home values are universal, the impact of those forces is determined in part by variables such as a neighborhood’s size, age, demographic makeup and location, location, location.

A closer look at three ZIP codes in Phoenix illustrates some of the different ways neighborhoods across the Valley are being affected, but no two communities are exactly alike.

In the F.Q. Story Neighborhood Historic District north of downtown, ZIP code 85007, the data show a slight increase in the median sales price from 2007 to 2008, although real-estate analysts said too few homes sold for a reliable statistic.

The median sale price in ZIP code 85050, a portion of Desert Ridge north of Loop 101, declined 13 percent in 2008 – a sign prices have begun to level off since the 21 percent decline the previous year.

ZIP code 85033, in the Maryvale neighborhood of west Phoenix, experienced a one-year median drop of 53 percent in 2008, greater than any other area in metro Phoenix after a decline of just 1 percent the previous year.

Other west Phoenix communities took a similar path. Experts say subprime lenders were issuing loans now considered “predatory” to non-English-speaking Hispanic residents in west Phoenix as late as August 2007, months after they had stopped selling such loans in predominantly English-speaking areas.

A recent surge in sales activity throughout the Valley’s more heavily affected areas, much of it involving homes passing from bank to investor, highlights the communities many buyers believe are at or near their respective bottoms, perhaps even poised for a moderate rebound.

It also signals a widely held belief that neighborhoods in which prices haven’t dropped significantly are on the way there.

“That (sales) volume has not increased in the more expensive areas is a sign that investors think prices haven’t come down enough yet,” local real-estate analyst Michael Orr said.

85007: Gentle drift

Tricia and Ernie Triplett were so pleased with the downtown Phoenix investment home they bought and renovated in 2006 that they decided to move in.

The Tripletts settled into the house they had planned to sell for profit in the F.Q. Story Neighborhood Historic District, southwest of Seventh Avenue and McDowell Road.

Tricia Triplett said renovating the 2,200-square-foot home was a dream project for her husband, a licensed contractor.

The family is growing, though, and the Tripletts have turned their gaze westward in search of another project. They recently listed their Phoenix home on the market for about $600,000.

“We know that there’s some really good deals out there, especially in the West Valley,” she said.

The ZIP code in which the Story neighborhood is located, 85007, is one of only two ZIP codes, both in central Phoenix, in which the median home price increased slightly from 2007 to 2008. The other is 85004, in the downtown area.

The Tripletts’ real-estate agent, Debbie McCormick of John Hall & Associates in Phoenix, said that the neighborhood has remained vibrant, with buzz about the recent opening of Metro light rail.

The area’s relatively strong home values cannot be attributed to a lack of foreclosures. Nearly 40 percent of 2008 home sales in the ZIP code were foreclosure sales, considerably higher than the Valley’s average.

A more likely explanation is the relatively small number of sales, foreclosure-related or otherwise, said Orr, manager of Mesa-based Cromford Associates. There were 85, including 33 foreclosure sales, for the year.

A few atypically high sale prices would elevate the median noticeably.

85050: Reverse logic

Orr said the Phoenix market has entered a strange “uncharted territory” in which the old ways of examining each submarket’s health no longer apply. For instance, a surge in recent sales activity is positive, despite its tendency to pull down an area’s median home value.

“The numbers are terribly misleading,” Orr said.

Activity in the Desert Ridge area’s 85050 ZIP code slowed considerably in 2008 from the previous year, with sales decreasing to 509 from 872.

But no other ZIP code on the edges of Phoenix performed as well as Desert Ridge in 2008 in terms of sales volume and home-value retention, according to Valley Home Values data.

Area real-estate broker Echo Farrell, owner of Farrell Fine Homes, said that the past year’s sales in Desert Ridge were driven largely by out-of-state buyers seeking a seasonal or vacation home.

While similar to north Scottsdale in its landscape and aesthetic, Desert Ridge is less expensive and closer to downtown Phoenix, Farrell said.

Still, the community’s 2008 median price of $340,000 was too high to prompt an investor bidding war, analysts said. And the “move-up” home buyer, for whom Desert Ridge was designed, was practically non-existent.

“In order to move up, they have to be able to sell their current home,” Farrell said.

Foreclosure resales in the ZIP code were relatively low, representing 14 percent of total sales, which helped to prevent a sharper decline in property values.

85033: ‘Like a stone’

At the opposite end of the spectrum was ZIP code 85033, in the Maryvale neighborhood, in which 69 percent of 2008 sales were foreclosure sales.

Seven ZIP codes, all in west or south Phoenix, saw declines in median home prices in 2008 of 40 percent or more from the previous year after holding steady from 2006 to 2007.

No ZIP code in the Valley fared worse in 2008 than 85033, which saw a 53 percent decline in the median home value.

“When the price dropped, it dropped like a stone,” Orr said.

Analysts, agents and activists said it is no coincidence that those areas have a high concentration of Hispanic residents.

A group called the Alliance for Homeowner Justice, formed by workers-rights group Laborers International Union of North America, has criticized lending tactics aimed at Hispanic home buyers, many with limited or no English proficiency, who were presented with loan terms in English.

The phenomenon prompted much debate at a National Association of Hispanic Real Estate Professionals conference held in Phoenix in September.

Orr said real-estate analysts nationwide have singled out 2007 loan activity in Hispanic areas of Phoenix as “one of the worst examples in the country of predatory lending.”

Mario Romero, a real-estate agent with the Melcher Agency in Phoenix, said that lending practices were not the sole cause of steep price declines.

“There’s another aspect to this that nobody talks about: job sanctions,” he said.

Romero said that when the employer sanctions law took effect in January 2008, many Hispanic residents moved away.

Even before passage of the law, Romero said west Phoenix residents were hit hard financially by the loss of employment opportunities in jobs such as construction and landscaping.

“It had an impact on investors, because a lot of the areas where they were leasing (homes), they can no longer lease,” he said.