Phoenix-area Home Prices Still Increasing, But Likely to Level Off Soon

June 16, 2010

Phoenix-area Home Prices Still Increasing, But Likely to Level Off Soon

TEMPE, Ariz.— The Phoenix-area housing market -- hit especially hard by the recession -- has been experiencing some price increases lately, but those may soon be coming to an end. A new report from the W. P. Carey School of Business at Arizona State University confirms the first year-over-year increase in home values marketwide happened back in April, after three years in negative territory. Continued upward momentum followed in May. However, this could be short-lived.

“Based on index values from last year and current conditions in the housing market, it is likely that small increases in house prices will continue for only a few months, followed by an extended period of relatively flat prices,” says Professor Karl Guntermann, the Fred E. Taylor Professor of Real Estate, who authored the new report with Research Associate Adam Nowak.

The Arizona State University-Repeat Sales Index (ASU-RSI) measures changes in average Phoenix-area home prices from year to year. The newest index shows a 2.6 percent decline in the market from March 2009 to March 2010, followed by a 1 percent increase from April 2009 to April 2010. Preliminary data predicts a 2.7 percent increase for May to May, but Guntermann doesn’t expect many more months of rising prices.

“The index numbers for both foreclosures and non-foreclosure homes provide relatively weaker preliminary numbers in May compared to March,” he says. “Non-foreclosure prices (which still haven’t gone positive on an annual basis) are likely to decline for many months before leveling off toward the end of 2010. This will not be good news for those homeowners worried about the equity in their homes or those waiting for the housing market to recover so they can sell their houses.”

The average price on foreclosure homes went up 3 percent between May 2009 and May 2010, which is actually a setback from the 5.3 percent increase between April 2009 and April 2010.

The overall median price for homes sold in March was $132,000, with the same number expected for May, too. Guntermann says the median moved to $130,000 last September and has stayed within $5,000 of that ever since.

The townhouse/condominium segment of the market appears to be leveling off now, with an annual rate of decline around 20 percent in both April and May. The preliminary median price of townhome/condo units was down from $81,000 in April to $80,000 in May.

Certain areas of the Valley are doing better than others, in general. Guntermann predicts Peoria is likely to be the first local city to show an annual increase in prices since the recession. The central, northwest and southwest regions of the Valley have shown dramatic improvement in recent months and -- once the final data is analyzed -- may prove to have had their first annual increases in April.

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 property 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 new report can be found at http://wpcarey.asu.edu/realestate/housing-market-reports.cfm. Further ASU-RSI analysis is also available from Knowledge@W. P. Carey, the business school’s online resource and biweekly newsletter, 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.