* Obama to speak about housing's rebound in Arizona
* Speech returns to themes of address given in 2009
* Arizona typical of a housing recovery in early stages
* Obama to back winding down Fannie Mae, Freddie Mac
By Mark Felsenthal
WASHINGTON, Aug 5 (Reuters) - With vacant, half-built residential developments that gathered dust after the Great Recession, the U.S. Southwest once symbolized the 2008-2012 housing bust that wiped out $7 trillion in homeowner equity and wrecked the finances of many Americans.
But as housing stages a recovery around the United States, including the hard-hit Sun Belt, President Barack Obama goes back to the region on Tuesday to claim some of the credit while urging further action to keep the housing winning streak alive.
More than four years after Obama outlined his plan to halt the housing market free fall in February 2009, he returns to Phoenix, where he will again talk about housing. The speech is another stop in a summer tour in which he is highlighting aspects of the economy that have improved under his watch while chiding political foes for obstructing faster progress.
But in Phoenix, the bright housing picture of increased sales and firmer prices masks continued challenges for those seeking housing, particularly those at the bottom rungs of the economic ladder, say homeowner advocates.
"My fear is that people think the problem is over," said Patricia Garcia Duarte, president of Neighborhood Housing Services of Phoenix. "There are still families that are struggling."
Even those who have steady work and decent credit records find themselves turned down by lenders requiring big down payments and pristine credit, she said.
In his speech, the president will propose overhauling the nation's mortgage finance system by winding down mortgage finance firms Fannie Mae and Freddie Mac to give private capital a bigger role, potentially freeing up funds and encouraging more lending.
He is also renewing a push to make it easier for homeowners to refinance their loans at lower rates, making it less likely that borrowers will struggle to make monthly payments.
Arizona, Nevada, California and Florida were the states hit hardest by cratering house prices, over-building and foreclosures that started during the 2008 financial crisis. In Phoenix, Obama can point to gains in house prices and declines in foreclosures to argue that his policies established a floor for housing markets and set the stage for a rebound.
But Garcia Duarte, whose organization is a chapter of the national nonprofit NeighborWorks America, says she still sees plenty of people who are trying to do everything they can to stay in their homes.
While foreclosures are down, more families are resorting to short sales - a sale for less than what is owed on the property - to minimize the damage, she says. And because investors have bought homes instead of individuals, some communities have seen homeownership decline and renting rise, she said.
"I would like the president to highlight that homeownership should be a good investment," she said. "I think policymakers shifted and crossed out homeownership as a good thing to do for this country."
RISING FROM THE ASHES
Obama's return to Phoenix will have historic resonance because he spoke there the day after signing his $787 billion stimulus plan into law more than four years ago.
He is again focusing on the economy, trying this time to pressure lawmakers into passing bills that reverse deep spending cuts, allocate funds to repair roads and bridges and raise the nation's debt limit before autumn deadlines.
The president's focus on housing reflects the sector's outsized impact on the broader economy. Not only is a home usually a family's largest purchase, home buying affects a swath of other businesses such as appliance, furniture and hardware sales, landscaping and finance.
Obama is using his series of speeches to press for action to strengthen a tepid economic recovery. He is emphasizing jobs and middle class economic stability to counter a Republican message of concern over debt and deficits.
With his legislative initiatives on guns and immigration dead or stalled, Obama may also be motivated to build support for Democrats in 2014 mid-term elections. Democrats hold a slim majority in the Senate that may be at risk and are in the minority in the House of Representatives.
With housing, the president may feel he has some progress to boast about.
"It went from free fall to surging house prices; there's a big revival in housing construction," said Mark Zandi, chief economist for Moody's Analytics. "The whole world has been turned around for a place like Phoenix."
The median new home sale price rose almost 18 percent in greater Phoenix between May 2012 and May 2013, and the median "normal" existing home sale price rose more than 12 percent in that period, according to a recent Arizona State University report. Normal sales exclude the sale of distressed or bank-owned properties.
Analysts say housing appears to be on a solid footing not just in the Southwest but nationally. Much of the early gains have been driven by investment funds, and economists say more individuals need to become involved to sustain the market. But that will require a stronger jobs market.
"Investors were instrumental in turning housing markets around, but we need to see the baton passed from the investor to the first-time home buyer," said Zandi.
Homeownership in the United States hit a 17-1/2-year low in the second quarter as Americans continue to shift toward renting, one of the lingering legacies of the recession.