July 28, 2010

Phoenix-area Home Prices Are Gradually Improving Overall

But Responsible Homeowners Still Suffer Most

TEMPE, Ariz. — If you’re a conscientious homeowner, you may ultimately pay the price. A new report from the W. P. Carey School of Business at Arizona State University shows that while home prices overall in the hard-hit Phoenix-area market continue to gradually rise, when you break it down, some segments of the market are going up, and others continue to stay in negative territory. The prices of foreclosure homes and lower-priced homes are doing better, while non-foreclosure homes and higher-priced homes remain down in value compared to last year.

“The foreclosure and non-foreclosure indices continue to move in opposite directions, with foreclosure houses showing small increases and non-foreclosure prices declining at double-digit rates,” says Professor Karl Guntermann, the Fred E. Taylor Professor of Real Estate, who authored the new report with Research Associate Adam Nowak. “The data also indicates the higher-priced segment of the market is likely to show small year-over-year declines through the rest of 2010.”

The Arizona State University-Repeat Sales Index (ASU-RSI) measures annual changes in average Phoenix-area home prices. The newest index confirms what was announced in previous reports, that April 2010 was the first month that the overall market showed a year-to-year increase since the recession began. From April 2009 to April 2010, the index moved up 0.7 percent. The increase from June 2009 to June 2010 is estimated to be about 1.8 percent. However, the positive momentum could end soon.

“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 another month or two, followed by an extended period where house prices remain relatively flat,” says Guntermann. “Unless economic and housing market conditions change dramatically, prices are likely to be relatively stable going into 2011.”

The overall median price for Phoenix-area single-family home sales included in the April index was $135,000. The preliminary figure for June is $133,000. Guntermann notes the median moved to $130,000 last September and has stayed within $5,000 of that ever since.

He also says the townhouse/condominium segment of the market appears to be leveling off at an annual rate of decline just under 20 percent. Townhome/condo prices are very low, with the median sale price in June estimated to be around $73,000. That’s another big step down from the low $80,000s, where prices had been for the previous several months.

Glendale, Peoria and Mesa have prices leveling off the most among Phoenix-area cities. However, home price declines for all areas of the Valley appear to be slowing.

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.

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.