Still Falling: Phoenix-area Home Prices Drop Record 32%

February 17, 2009

Still Falling: Phoenix-area Home Prices Drop Record 32%

President Obama Visits Phoenix to Address U.S. Mortgage Crisis

TEMPE, Ariz. — President Barack Obama will announce his plan for dealing with the U.S. mortgage crisis tomorrow as he visits Phoenix, one of the areas hit hardest by foreclosures. At the same time, new numbers show that despite talk of economic stimulus and mortgage bailout plans, the Phoenix-area housing market continues to plunge, setting a new record with a 32-percent drop in average home prices in just one year. The latest data from the Arizona State University – Repeat Sales Index (ASU-RSI) reveals average prices in the Valley of the Sun declined 32 percent between November 2007 and November 2008.

The index started showing double-digit declines in home prices back in March and has continued to fall about 2 percent more every month over the past few months. The current decline in home prices is now the longest in Valley history at 21 straight months of drops in the year-to-year index.

“It will probably be months before the index levels off, which would be the first step in ending the home prices decline,” says Karl Guntermann, the Fred E. Taylor Professor of Real Estate at the W. P. Carey School of Business at Arizona State University, who calculates the ASU-RSI with research associate Alex Horenstein. “Preliminary estimates for December and January show the index is likely to drop another 1 percent each month.”

The Sun City/Sun City West area has done relatively well in the most recent index -- November 2007 to November 2008 -- only dropping about 14 percent. Glendale has seen the worst dive, with home prices falling 37 percent.

The median price of houses in the index was about $160,000 in October 2008, but it’s down to $150,000 for November. The peak was at $262,500 in 2006.

The ASU-RSI is based on repeat sales, the most reliable way to estimate price changes in the housing market. Repeat sales compare the prices of a single house against itself at different points in time, instead of comparing different homes with different quality factors.

The ASU-RSI is produced through the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. The current report and archived previous reports are available at the Division of Real Estate - Repeat Sales Reports. Further analysis is available at http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1750.

W. P. CAREY SCHOOL OF BUSINESS
The W. P. Carey School of Business at Arizona State University is one of the top-ranked and largest business schools in the United States. The school is internationally regarded for its research productivity and its distinguished faculty members, including a Nobel Prize winner. Students come from 75 countries and include more than 60 National Merit Scholars. For more information please visit wpcarey.asu.edu and http://knowledge.wpcarey.asu.edu/.