As Home Prices Fall, Phoenix Housing Market Rises From Ashes

May 19, 2009— -- With a new baby on the way Patrick Sliney and his wife wanted to buy a new home, and since prices had fallen so precipitously in Phoenix in recent months, he thought owning a home would be no more expensive than renting.

After paying $1200 in rent each month for the past three years, he figured he could spend that same money each month towards a mortgage.

As foreclosure notices blew through town like tumbleweeds and For Sale signs dotted the landscape like cacti, finding and buying a new home, he thought, would be easy.

He was wrong.

"There were plenty of homes to be had when we started looking. There were 18 houses listed in the one neighborhood where we most wanted to move, a maybe 10-square-mile area. Within two weeks, they had all been sold. It was that quick," said Sliney, 32, a computer engineer and Air Force veteran.

Are You Looking to Buy a Home or Worried About Losing Your Home? Share Your Story With ABC News

For months, a glut of foreclosed homes caused prices to fall in Phoenix at rates faster than anywhere else in the country. Between January 2006 and January 2009, prices fell in half, the biggest decline in the United States.

But in March that rate began to slow, indicating to economists the market might be turning around. To investors, that slowdown signaled that the market could be approaching bottom, prices might soon go up and they should buy up properties now while the getting was still good.

As recently as February, Phoenix homeowners facing foreclosure were so under water they were willing to negotiate with buyers well below the asking price and sell for less than the value of the house.

But with prices so low now, investors -- some from as far away as Canada -- are sweeping in to buy up low-end homes, driving up prices, starting bidding wars and sometimes closing out would-be first-time buyers like Sliney.

Sliney was outbid on four homes for which he was willing to pay the asking price, before finding a two-story four-bedroom home outside the city.

He said he recently closed on a "brand-new house in an exclusive neighborhood in the mountains just outside Phoenix" for $185,000 or $1,235 a month, just a few dollars more than his current rent. As a veteran he did not have to put any money down.