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Report: Housing market may stabilize this spring

February 25, 2010

The hard-hit Phoenix-area housing market may finally stabilize this spring. According to a new report from the W. P. Carey School of Business at Arizona State University, a record stretch of price drops may soon come to an end.

The Arizona State University-Repeat Sales Index (ASU-RSI) measures changes in average Phoenix-area home prices from year to year. The index has been declining for 33 months in a row, but the rate of the drops has been getting slower and slower.

The latest report shows single-family home prices fell 17 percent from November 2008 to November 2009. That’s less than the 20-percent dip from October 2008 to October 2009 and the 23-percent drop from September to September. Preliminary estimates for December and January are 13 percent and 9 percent, respectively.

“If the present trend continues, prices will level off later this spring,” said professor Karl Guntermann, the Fred E. Taylor Professor of Real Estate, who authored the report along with research associate Adam Nowak. “Prices are currently down 47 percent from the peak in mid-2006.”

Lower-priced homes have generally dropped in value much faster than higher-priced homes. For example, the index shows a 23-percent decline in the average price of lower-end homes from November 2008 to November 2009, with only a 15-percent drop for more expensive homes.

The median single-family home price for November was $135,000, up from $131,000 in October. However, preliminary numbers show another fall to $132,500 in December and $125,000 in January. The foreclosure segment of the market seems to be stabilizing fastest, with non-foreclosure homes now prompting the dips.

“The decline in foreclosure house prices was driven primarily by mortgage-related issues, but the continuing decline of non-foreclosure prices has more to do with weak economic conditions, especially in the Phoenix area, and the difficulty buyers face in qualifying for mortgage loans,” Guntermann said.

The prices of townhomes and condos keep dropping, though it appears the most rapid declines happened last summer. Average prices went down 28 percent from November 2008 to November 2009. That’s slightly better than the 31-percent drop from October to October. The median price of townhouse/condo units was $89,000 in November.

Guntermann adds some unfortunate news for two specific areas of the Valley, where prices are still plummeting.

“While prices in most cities may stop declining later this spring,” he said, “at this time, there is no way to estimate when the declines will end for Scottsdale/Paradise Valley and Sun City/Sun City West.”

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