Why Do Home Values in Some Phoenix Area Communities Seem to Be Decreasing??

Currently in many real estate sales, Fannie Mae and Freddie Mac,the leaders in the lending industry, are trying to demand approx. 20% over market price on the homes they are selling nationwide. They are attempting to drive prices up.

In other areas of the country where they are in the pit of the distressed market, with low values, this 20% tactic is fine. However, in our area which is the #1 recovery area in the US and where values have miraculously risen, this 20% tactic artificially drives the values even higher. The higher home value is OK if a cash buyer is willing to pay the inflated value, but if the buyer needs a loan, usually the buyer's lender will see the artificial high price, value the house lower than list price and in many cases, Fannie Mae will have to lower their expectations(and the contract price!).

Because the Phoenix area prices rose quickly and our area is no longer viewed as an "extreme" bargain area, many of the cash investors have left for Florida, Nebraska and Iowa. This leaves the bulk of our sales to the buyers that waited patiently and who need loans. So we are seeing the slight downward price corrections on the distressed properties at the time of the buyer's appraisal more and more.

In a few communities that are attracting many FHA buyers, there may appear to be a slight decrease in home values. Many of today's buyers are the "boomerang buyers" i.e buyers that experienced a short sale or foreclosure in the past 3-5 years and are now getting back into the market. An FHA loan is usually their first choice because of the relaxed standards and the low down payment. These FHA friendly neighborhoods are not necessarily declining in desirability, but simply going through a valuation correction. Usually these corrections are short lived... less than 6 months... because our market is so healthy and we have swift sales.

So, if you have seen homes valued slightly lower or are concerned that the values are not rising as quickly as they were in the beginning of the year in your community, don't fret. Phoenix is on a healthy path of recovery and we will continue to climb onwards and upwards!