- Associated Press - Thursday, January 8, 2015

PHOENIX (AP) — Throughout Barack Obama’s presidency, Arizona has served as a symbol of the nation’s real estate crisis and recovery.

When Obama visited Arizona within weeks of taking office in 2009, the state was among the hardest hit by the housing collapse and the White House was pushing multibillion-dollar programs to save homeowners from foreclosure.

Six years later, Arizona’s foreclosure crisis has evaporated. Home prices have soared and are nearing pre-crisis levels.

On Thursday, Obama returns to Arizona seeking to tackle lingering issues and unintended consequences of the recovery. He’ll announce a cut in mortgage insurance premiums on Federal Housing Administration loans, a move aimed at attracting new homebuyers.

“We’re taking this measure to make homeownership more affordable for responsible families,” Housing Secretary Julian Castro said ahead of the president’s remarks at a Phoenix high school.

The housing announcement is the first marker for Obama as he unveils new tenets of his economic agenda in the lead-up to the State of the Union address on Jan. 20. The economic recovery has been uneven through much of Obama’s presidency, but officials say they feel more confident that recent signs of progress can be sustained given the stronger level of growth and increases in consumer confidence.

Like other areas of the economy, the housing market has rebounded from the depths of the recession. Yet home sales nationwide slowed in 2014, as rising home values pushed many would-be buyers to the sidelines. Wage growth has failed to match the sharp increase in home prices since the market bottomed out in 2012, leaving many Americans without the income level or down payment to buy a home.

In Arizona, homeownership rates have dropped by more than 6 percent from their 2006 peak. New home construction in the state also remains well below what economists believe is a healthy level, with many buyers shut out of the market because of tougher loan standards, higher prices and the lingering fears from the foreclosure crisis.

The rate cut Obama will announce Thursday drops the FHA mortgage insurance premium from 1.35 percent to 0.85 percent. Administration officials said the move would save the average homebuyer $900 a year, help 800,000 who refinance their mortgages save money, and draw 250,000 new homeowners into the market over the next three years - a modest increase in sales.

The rate cut will go into effect by the end of the month.

Arizona-based economist Elliott Pollack said the move would “help on the margins, but it really isn’t a game-changer.”

Still, the savings would be meaningful for individual homeowners. The National Association of Realtors estimates that a homebuyer with 5 percent down and a $175,000 mortgage would save $818 per year, or $14,079 over the life of a 30-year mortgage.

Even with the reduction, the new 0.85 percent premium is higher than historic norms. The rate was initially increased to raise FHA capital reserves, which took a hit during the housing crisis and are still not back to their required minimums.

Sen. Bob Corker, R-Tenn., said the decision was “bad news for taxpayers and is yet another irresponsible, head-scratching decision from the administration in regards to our nation’s housing finance system.”

Administration officials said that even with the rate cut, FHA will be able to replenish its reserves. Officials also said the rate cut would do nothing to change the eligibility requirements for FHA loans.

“Our action is not a return to the past,” Castro said.

Obama is expected to tout Thursday’s housing announcement in his State of the Union address. In a strategy shift for the White House, the president is unveiling some of the proposals from the address ahead of the Jan. 20 speech rather than follow the usual protocol of keeping policy announcements secret until Obama speaks to Congress.

The president is making his pre-State of the Union pronouncements during a series of stops around the country. He visited Michigan on Wednesday and closes out the week in Tennessee, with additional travel expected next week.

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AP Economics Writer Josh Boak in Washington contributed to this report.

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Follow Julie Pace at https://twitter.com/jpaceDC and Bob Christie at https://twitter.com/APChristie

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