Phoenix-area Home Prices Have "Reached a Turning Point"

June 15, 2009

Phoenix-area Home Prices Have "Reached a Turning Point"

ASU Study: Estimates Show Third Month of Slowing Declines

TEMPE, Ariz. — Phoenix-area homeowners can take some comfort from a new Arizona State University study that indicates the Valley housing market is finally starting to turn around.

The Arizona State University-Repeat Sales Index (ASU-RSI) measures changes in average Phoenix-area home prices from year to year. The latest report shows a record 37-percent drop in the index from March 2008 to March 2009. However, that’s stagnant from the same 37-percent fall noted from February 2008 to February 2009. It’s also followed by preliminary estimates of a lesser 35-percent drop for April 2008 to April 2009, and a 33-percent dip from May 2008 to May 2009.

“If they hold up, the April and May figures would be the first evidence that the housing market has reached a turning point,” 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 Adam Nowak. “This indicates the rate of decline is slowing, and even though actual home prices continue to drop, they’re falling by much smaller amounts than they typically have during the past 18 months.”

The index has now declined for 25 months in a row, the longest drop in Valley history. From March 2008 to March 2009, Glendale experienced the worst fall of any local city at 40 percent. Tempe saw the mildest decline in the index at 18 percent.

Preliminary estimates show the median Phoenix-area home price at $115,000 in May. That would put prices back at the same level as October 1998.

“The large number of foreclosed properties being sold at distressed price levels suggests that the median price is unlikely to increase significantly in the near future,” says Guntermann, who points out the positive, that this makes homes in the area more affordable.

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 reports are available at the Division of Real Estate – Repeat Sales Reports. Further ASU-RSI analysis is available at http://knowledge.wpcarey.asu.edu.

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/.