It looks like it’s safe to pencil in 2010 as a year of increasing but low residential construction in Arizona.

The single-family construction market will hit bottom in 2009, but the multifamily and commercial markets will continue to head down, according to a panel of 13 economists who watch the construction market for the Greater Phoenix Blue Chip Economic Forecast.

Single-family permits are expected to decline another third this year from the 12,500 units of single-family housing permitted in 2008, according to the panel. In 2010, however, the panel anticipates an increase of more than 50 percent. If so, the level of permits in 2010 still will be very low by historic standards some 80 percent below the 2005 peak, but at least the market would be moving in the right direction.

Other data I’ve been meaning to write about but haven’t had time show that the inventory of spec homes is approaching the normal range after being astronomical since 2006. Arizona home builders were terrible at controlling their inventory.

I always say Arizona home builders build until they run out of money. And that is what happened. Plenty of Arizona home builders eventually ran out of money and went out of business. As some builders went belly up, the huge oversupply of new homes began to correct.

As Arizona home builders get their inventory of spec homes in line, they won’t be the drivers of lower prices anymore. At the beginning of the burst in home prices, new home builders were often the major force. They lowered their crazy high new home prices and that lowered the value of all homes in their subdivisions and nearby areas.

Eventually, bank foreclosures took over as the major driving force behind lower prices.

Nevertheless, once Arizona home builders get their inventory in line and start building again, they won’t be putting additional downward pressure on Arizona home prices anymore.

FYI: Pulte Homes agrees to buy Centex in $1.3B deal