Home prices likely to stay flat for rest of year

After several months of gradually rising prices, the Phoenix-area housing market is hitting a wall. A new report from the W. P. Carey School of Business at Arizona State University shows absolutely no year-over-year home-price appreciation from July 2009 to July 2010. The report’s author also states the market is likely to stay flat until the middle of next year.

“It is likely that house prices throughout the metro area will remain essentially flat for the next 12 months,” says Professor Karl Guntermann, the Fred E. Taylor Professor of Real Estate, who authored the new report with Research Associate Adam Nowak. “While the improvement seen over the past 18 months isn’t likely to continue, there also is no evidence that house prices will resume a downward trend, contrary to some published reports.”

The Arizona State University-Repeat Sales Index (ASU-RSI) measures annual changes in average Phoenix-area home prices. The latest index shows a zero-percent change from July 2009 to July 2010. That follows a 1.8-percent increase from June 2009 to June 2010, a 2.6-percent increase from May 2009 to May 2010, and a 0.7-percent increase from April to April. Before that, the market had seen year-over-year decreases since the recession began. Still, some segments of the market have been doing better than others and will continue to do so.

“The data shows lower-priced houses will still see price increases through the rest of the year, but at gradually slower rates,” says Guntermann. “Higher-priced homes are likely to show small declines year-over-year for the rest of 2010.”

Guntermann adds that foreclosure homes continue to have small price increases, while the prices of non-foreclosure homes are decreasing. The overall median price for sales included in the May index was $132,000, and the preliminary figure for July is lower, at $129,900.

“The three hardest-hit regions of the Maricopa County still show total price declines from the market peak of more than 50 percent,” says Guntermann, referring to the central, northwest and southwest areas of the Valley.

The townhouse/condominium segment of the market appears to have leveled off at an annual rate of decline just under 20 percent. The preliminary median price of a townhome/condo was $77,100 in July, slightly up from $75,500 in June.

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