Despite talk, there's no sign of metro Phoenix housing bubble

The dreaded term "housing bubble" has crept back into conversations about real-estate markets with big increases in home values, including metro Phoenix.

The phrase, used to describe the housing boom and bust of 2005-11, conveys a looming sense of doom, particularly among those who owned a house when the bubble burst the last time.

Like most Valley homeowners, I saw my home’s value jump more than 50 percent in two years and then fall twice as much during the subsequent five-year crash.

But when I hear the housing bubble tag attached to the Phoenix-area housing market now, I feel more skepticism than dread.

So do the experts I asked this week about the potential for another Phoenix-area housing bubble.

Here’s why

A recent Realtor.com report talking about a potential housing bubble found home prices in 31 of the U.S.'s 50 biggest housing markets have recovered to boom levels or even higher.

Metro Phoenix’s market isn’t one of them.

“The Valley’s median home price is hovering around $245,000, and that’s still 93 percent of peak prices during the boom,” said Tina Tamboer, senior housing analyst with the Cromford Report.

Compared with 2004-06, when Phoenix-area home prices shot up more than 50 percent, the climb back has been much slower.

“It’s taken us six years to get where we are with prices now, and we still aren’t fully recovered,” she said.

Tom Ruff, housing analyst for the Information Market, which is owned by the Arizona Regional Multiple Listing Service, said the Valley’s housing market isn’t being driven by speculators and bad loans as it was during the boom.

In some of metro Phoenix’s most popular neighborhoods and more affordable areas, demand is ahead of supply, so prices are climbing faster, he said.

That is leading some to be concerned about "micro bubbles" in those Valley hot spots across central Phoenix, south Scottsdale and downtown Tempe, Ruff said.

But he isn't seeing it. Since Ruff, with Mike Orr of Cromford, called the month of the peak of the boom (September 2006) and the bottom of the crash (September 2011), I believe him.

Bubble watching

The 2004-06 housing bubble started in the Valley’s farthest-flung suburbs, with many new houses and subprime no-down-payment mortgages.

Homebuilding has yet to recover in metro Phoenix, with the number of new houses going up only at a third of 2006’s peak level.

Mortgage requirements and down payments are higher now than they were during the boom, although there is a move to roll back some of the regulation on lenders that was put in place during the crash.

And the Phoenix-area neighborhoods closer in that are drawing enough buyers to spark bidding wars on homes aren’t necessarily seeing huge jumps in prices.

Tamboer said prices in popular areas such as south Scottsdale and midtown Phoenix have to be looked at more closely. Many of the homes in those areas have been purchased, renovated and expanded during the past decade, so they aren’t the same house reselling.

That’s why she and Orr break down home prices by square foot to better track metro Phoenix’s housing market.

Tamboer said the current median price per square foot for a Valley home is about $155, more than 20 percent below the peak.

It's another sign that metro Phoenix isn’t in a housing bubble, but it's understandable why many of us are watching.

The last boom, brought on by Wall Street betting against homeowners and backing subprime loans, caused a bust we are still recovering from. Few knew and understood what Wall Street was doing until it was too late.

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