GREG BRYAN / ARIZONA DAILY STAR

More Photos (1):

Other articles by Josh Brodesky:

Payout near for some 1st Magnus ex-workersPlanned Coronado sale questionedNew home building drops off noticeablyLandlords to pay $150K to settle suitJosh Brodesky: Out in suburbs, pair finds solitude amid vacant lotsTucson retailers jockey for profitable holidaysNew store at El Con to hire 60-70 workersBurlington hiring for new Tucson storeJosh Brodesky: New pitch to home buyers: job-loss mortgage insuranceMedian home-sales price here at '04 level

Sales and Marketing
Ever-Ready Glass
Glass Sales Health Care
RLM Services, Inc.
Orthopedic Assistant-CMA Health Care
BENSON HOSPITAL
RESPIRATORY THERAPIST

Nearly 9,000 properties in Pima County entered the foreclosure process last year, more than triple the number in 2006 and a key measure of how far Tucson's housing market has fallen from its boom.

The dimensions of the problem have become tangible to Betty J. Villegas, the county's housing program manager, in the form of stacks and stacks of returned letters.

For the past year, Pima County has been sending a letter to each property owner who receives a trustee sale notice, telling the homeowner about what agencies and services are available — for free — to help them keep the home.

But piles of these letters have been returned to Villegas' office because the homeowners have simply walked away.

While the 8,956 trustee sales notices recorded in Pima County in 2008 are a dramatic spike compared with previous years, economists and housing experts were hardly surprised.

Many experts say foreclosures flooding the market have fueled the plunging values of Tucson homes. Data from the Tucson Association of Realtors shows the median price of a home sold here last year dropped from $203,500 in January to $167,900 in December. More foreclosures are expected to hit the market in coming months.

Although trustee notices do not necessarily result in foreclosures, they are a good measure of distressed properties. Trustee notices are filed after property owners have been in default for at least three months.

There were 4,814 such notices in 2007 and 2,842 in 2006.

"This just reflects the fact that a lot of loans were made to people who in the best of times would have had trouble … making payments on their loans," said Marshall Vest, an economist at the University of Arizona's Eller College of Management. "I think there is a good chance that the economy is going to bottom out by the middle of this year, and if I am wrong, maybe by the end of this year. And then we will have a recovery, but it is going to be slow."

Essentially, the flood of foreclosures has increased housing inventory while lowering prices, dragging down values and wiping away equity.

"The price point for the foreclosures is so significantly lower because the banks have got to dump the properties. It pulls down the values of other homes," said Rosey Koberlein, chief executive officer of Long Realty.

In recent years foreclosures accounted for about 1 to 2 percent of resale home sales, but year-to-date through November 2008 foreclosures accounted for 16 percent of those sales, according to analyst John Strobeck, owner of Bright Future Business Consultants, which publishes housing-industry data on the Tucson area.

"I wish I could say we are going to be out of this next week, but boy, there is nothing that says that to me," Strobeck said.

While 2009 might see a slight decline in the number of Pima County foreclosures, Strobeck said he expects the number to pick up in 2010 when the rates on 5-year adjustable rate mortgages issued in 2005 start rising.

"If we could get around the foreclosure problem, we would see the market return," Strobeck said. "But foreclosures are going to be the thing that keeps us going in this situation for a considerable amount of time."

Indeed, a December report from Moody's Economy.com said the downturn in Tucson's housing market has placed the construction industry in a "free fall" and that Tucson "will experience a more pronounced downturn than the U.S. because of the fallout in the housing market."

"I think foreclosures are what's going to extend this downturn," said Nathan Topper, an assistant economist with Moody's Economy.com who wrote the report. "They go on the market, and they add to this excess of supply. It discourages home building."

Villegas, too, said she expects 2009 to be just as tough as last year, and she said those homeowners who are current but facing financial trouble should contact their lenders now.

"We keep hearing that the numbers are not going to get better," Villegas said. "There are a lot of people who are barely making payments right now who can take advantage of refinancing" or modifying loans.

On StarNet: To view a map of Pima County foreclosures in 2008, go to azstarnet.com/pdf