The latest Valley Home Values report will show prices dropped in every Phoenix-area ZIP code during the first eight months of 2009. A closer look at the numbers, though, reveals newer communities on the outer edges of metropolitan Phoenix are seeing smaller declines in home prices this year compared with 2008.

Those areas, including neighborhoods in Buckeye, Gilbert, Queen Creek and Surprise, were the first to experience the housing market’s collapse. Those former housing hot spots could be the first to recover. Older areas closer to downtown Phoenix, including many central Phoenix neighborhoods, suffered the biggest home-price hits this year.

Most of these areas were the last parts of the Valley to see housing values tank, but they could bounce back more quickly because many of the neighborhoods are popular with people who want to live closer in.

Positive signs

And there are signs the Valley’s housing market has begun to inch toward a recovery.

Foreclosures have dropped during the past two months. Home sales are well ahead of last year’s pace. Home prices are slowly ticking up.

“Valley home prices hit bottom in April,” said Mike Orr, who publishes the “Cromford Report,” a daily analysis of metropolitan Phoenix’s home-sales data. “Foreclosures have peaked.

The latest figures on foreclosure rates, home sales and home prices may be early indicators the housing market is starting to come back.

Valley foreclosures fell 29 percent in September from the record 5,300 reached in July. Pre-foreclosures were also down last month, but there were still 7,857 homes that lenders started to foreclose on.

This is the key gauge of the health of metro Phoenix’s housing market.

As long as lenders continue to foreclose on Valley homes and resell them for half of what they sold for a few years ago, home prices will fall.

In June, Valley home sales buoyed by foreclosure-home resales rivaled monthly records set during the boom years. Although sales have slowed a little in the past few months, 85,000 homes have sold across metro Phoenix so far this year. That’s 50 percent ahead of last year’s pace.

There’s a positive indicator in the slight drop in recent home sales. Fewer of the sales are foreclosure homes.

Earlier this year, foreclosures homes accounted for almost 70 percent of all Valley home sales. Slightly less than half of the home sales in September were foreclosure homes.

The median price of a Valley home has ticked up to $135,000 after falling to a 10-year low of about $120,000 six months ago.

The current median is half of what the record median high price for the market was in 2006, but it is heading in the right direction. Valley home prices started falling in mid-2007 but didn’t plummet until late in the year when lenders placed thousands of foreclosure homes on the market all at once and began accepting low-ball offers.

The supply of foreclosure homes for sale in the Valley has also fallen, another good sign for the market. There currently are about 4,500 foreclosure homes listed for sale, compared with more than 20,000 in February.

The federal government’s plan to push more lenders to restructure the mortgages of borrowers facing foreclosure could help ensure foreclosures don’t soar again.

A full recovery isn’t imminent, but the latest signs suggest the Valley’s housing market is beginning to pull out of its nose dive.

Excerpted from the Arizona Republic