Phoenix home prices fall for first time in ten years

For the first time in the last decade, year-over-year median home prices in the metropolitan Phoenix area have dropped, from $263,000 to $256,900, down from the peak of $267,000 in June 2006.

Former housing bull Jay Q. Butler of the Arizona Real Estate Center at ASU says:

Even though mortgage interest rates have been declining for the last few months, limited home appreciation and household income continues to raise concern about the ability of some homeowners to maintain their homes. ... This may be especially evident for those that have used some of the more creative financing instruments, such as option payment plans and initially low interest rate adjustable mortgages.

Florida is seeing growing foreclosures, especially among those with Adjustable Rate Mortgages (ARMs) with negative amortization options. There are $200 billion in ARMs resetting their rates in 2006 and another $1 trillion plus will be resetting in 2007, expected to lead to more foreclosures. This will apply further downward pressure on prices, and we should expect to see some of the same here (an increase has already been seen in Maricopa County notices of trustee sales), though I think Arizona has had a lower percentage of ARMs, interest-only, and negative amortization option loans than other parts of the country.