ASU study: Phoenix-area home prices “at or close to bottom”

Phoenix-area home prices are “at or close to a market bottom,” according to a new Arizona State University study that offers hope to many Valley homeowners.  

The Arizona State University-Repeat Sales Index (ASU-RSI) measures changes in average Phoenix-area home prices from year to year. The latest report confirms home prices are falling at a slower and slower pace.   

While Valley home prices saw a 37-percent decline in both the February and March reports, the new April 2008 to April 2009 report reveals a lesser 35-percent drop. Preliminary estimates for May and June show annual drops of 33 percent and 31 percent, respectively.  

“April is the first month with a slower annual rate of decline, and the progressively smaller declines over the next two months are pretty good evidence that the worst of the price drops are in the past,” 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. “While the housing market is still quite volatile, it may turn out that the low point in terms of price occurred in May, almost three years after prices peaked in the Valley.”  

The current slide in home prices is the longest in Valley history at 26 months. This is the first month that Gilbert has been included in the city breakdown of the report. Gilbert and Sun City show the mildest declines in the area from April 2008 to April 2009. The worst drop was in Glendale, where prices plunged more than 40 percent in just one year.  

Preliminary estimates show the median Phoenix-area home price for June is $119,000. That’s up from $115,000 in May and $117,000 in April. However, Guntermann says the large number of foreclosed properties being sold at distressed price levels suggests the median price is not likely to go up much for a while.  

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.