Foreclosures represented about 35% of the existing-home transactions in the Phoenix area in May, down from 36% in April and 38% in March. The figures represent an improving trend since the beginning of the year when the rate was 43%, but whether the market has bottomed isn't certain, according to a report from the W. P. Carey School of Business . "Although the number of foreclosure pre-filings has been declining for the last several months, this trend is not unusual in the early part of any year, with a typical pickup over the next few months," said Associate Professor of Real Estate Jay Butler. "While any decline is positive, fundamental uncertainty remains as to whether foreclosures will cease to be the dominant force in the market." Butler points to ongoing discussions about stricter underwriting guidelines, secondary market reforms and plans to lower the Federal Housing Administration loan limits as  factors that could influence the market in the future. He also emphasizes that the job market and economy are still struggling. (The Federal Housing Finance Agency also plans to reduce its conforming loan limit.) More than 3,500 foreclosures occurred in May in the Phoenix area, according to the report. Despite the recent monthly drops, that’s still more than the 3,230 in May 2010. When foreclosures are added to the resales of previously foreclosed properties, they account for 61% of the Phoenix-area housing market for May. More than 10,000 existing homes changed hands in May, up from 9,660 transactions a year earlier. The median price for existing homes resold in the market in May (not new foreclosures) was $125,000, the same as in March and April, down from $144,000 a year ago. In the townhouse/condominium market, about 1,600 units changed hands in May, and 460 of those were foreclosures, nearly equal to year-ago figures. The median resale price for a townhome/condo was $80,500 last month, down from $99,775 a year ago. "Beyond the impact of foreclosure activity, the absence of a strong move-up market, which is fundamental to a housing recovery, will also limit any growth in home prices," the report said. "While lower prices can greatly improve affordability, they can adversely impact many owners and potential sellers whom are watching their limited equity erode, as prices decline to and even below existing debt level." For the last year, about 40% of the traditional sales were foreclosed homes that were sold again with a median-price markdown of 14% from the foreclosed price. Write to Kerry Curry. Follow her on Twitter @communicatorKLC.