PHOENIX — After four years of renting because they were priced out of the real estate market, Jamia Jenkins and Scott Renshaw concluded the time had arrived for them to buy.
They saw that home prices had dropped so fast here -- faster than in any other big city in the nation -- that mortgage payments would be less than the $900 they paid in rent. The city is littered with foreclosed houses, so the couple figured they could easily snatch up something in the low $100,000s.
Three months later, they're still looking.
They have submitted 13 offers and been overbid each time.
"It's just pathetic," said Jenkins, 53. "Investors are going out there and outbidding everyone."
Phoenix's housing bust has turned into a quasi-boom, a sign that its market may have hit bottom and a sneak preview of what a national housing recovery could look like.
More homes are selling than at any time since 2006. Prices are slowly stabilizing. Buyers are once again finding themselves in frantic bidding wars -- only this time over foreclosed houses selling at deep discounts rather than ranch homes listing for vast sums.
"The free market is at work," said Shannon Hubbard, a real estate agent and blogger here. "Prices got driven down so much that people said, 'I'm going to come out and play.' "
Home prices continue to plummet or tread water in much of the nation, but there have been tentative signs of life. Pending home sales rose 3.2% nationally in April, the second month of increases after a record low in January.
John Burns Real Estate Consulting in February identified Phoenix as "the most unique market in the nation," where affordability was better than at any time since 1981 and buying a house was once again cheaper than renting.
Since then, said Chris Porter, a manager at the Irvine-based firm, there have been signs of life in the Sacramento and Washington, D.C., housing markets.
"You'll start to see some markets emerge, and it'll be the ones that went into the downturn first," Porter said. "But it's going to be a slow recovery."
Phoenix experienced one of the most dramatic real estate crashes in the nation. Median home prices for resold homes peaked at $268,000 in June 2006. Now the median price is $120,000. It is the biggest decline in the top 20 metropolitan areas tracked by the Standard & Poor's/Case-Shiller home price index.
The collapse was devastating in a city that has long depended on housing to power its economy. In the last year, Phoenix lost 41,000 construction jobs and 136,000 overall, accounting for 7% of its workforce.
Home building came to a halt. Many illegal immigrants, discouraged by the sudden lack of jobs, returned to Mexico. Realtors cut staff. Home prices dropped faster and faster each month for two years.
Until March. For the first time in two years, the decline in home prices slowed -- from 37% in February, compared to the previous year, to a still-painful 36%.
Arizona State University business professor Karl Gunterman noted the incremental slowing in a report last month, saying it could be signs of the market bottoming out.
"Once this thing turns, it may turn slowly," Gunterman said in an interview. "But at some point I think it's going to pick up because prices are so low."
Mike Orr, a Phoenix real estate analyst, thinks the market already has hit bottom. Among the signs: As recently as January, a year's worth of homes sat on the market; in March, that dropped to seven months' worth of inventory.
"It's a dramatic change in just three months," he said. "I never imagined it'd get this crazy this quickly."
Orr thinks mid- and high-priced properties still will lose value in the coming months.
"I wouldn't be investing in luxury right now," he said. "But if you're looking for inexpensive homes, you're going to have a fight on your hands."
In a throwback to the boom, real estate agents and investors are swapping stories of brutal competition for bottom-end homes.
Orr called on one property to find it had already received 14 bids. Realtor David Thomas recalled getting a client in a $60,000 foreclosed home in the suburb of Avondale, on a street lined with vacant properties. He recently returned to find almost all the for-sale signs gone.
Jenkins, who has looked at more than 80 houses, said she was being cautious not to get caught up in the frenzy.
"It's going to create the same damn situation we had before," she said. "You're going to buy a house and it's not going to be worth what you paid for it."
Skeptics of the turnaround note that the competition for foreclosed homes may be artificial. They argue that the number of bank-owned properties has shrunk because some lenders held off on foreclosures early in the year as they waited for President Obama to unveil his plan to aid distressed homeowners.
Some warn that a potential flood of new bank-owned properties could drive down prices further.