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Report: Valley foreclosure prices may have hit bottom

January 27, 2010

The Phoenix-area housing market may level off this spring, and the prices of foreclosed-on homes in the Valley may have hit bottom already. That’s according to a new report from the W. P. Carey School of Business at Arizona State University.

The Arizona State University-Repeat Sales Index (ASU-RSI) measures changes in average Phoenix-area home prices from year to year. The latest report shows single-family home prices fell 21 percent from October 2008 to October 2009. That’s less than the 23-percent drop from September 2008 to September 2009 and the 25-percent drop from August to August. Preliminary estimates for November and December show even smaller annual declines: 17 percent and 12 percent, respectively.

“The rate of decline has been slowing by 2 or 3 percent each month since mid-2009,” said Karl Guntermann, the Fred E. Taylor Professor of Real Estate, who authored the report along with Research Associate Adam Nowak. “If this keeps up, prices may level off by this spring.”

Guntermann’s latest report includes a new index specifically for foreclosed-on homes. It shows a 15-percent drop in prices on those homes from October 2008 to October 2009. The preliminary decline from November 2008 to November 2009 was down to 8 percent, and based on a limited amount of data, December will likely come in at just a 2-percent decline.

“If the preliminary numbers hold up, the foreclosure segment of the housing market will have reached bottom,” Guntermann said. “A leveling out of the foreclosure RSI would reflect both the substantial decline in prices that has occurred over the past two years and increased demand from first-time buyers and investors for those homes.”

The overall median price for single-family Valley homes was $131,000 in October. That’s up from $130,000 in September. Preliminary estimates for November and December are $135,000 and $132,500, respectively.

The ASU-RSI has now been dropping for a record 32 months in a row since the price peak in mid-2006. To demonstrate the difference between foreclosed-on homes and other houses, note that the median price of foreclosed-on homes in October was $115,000. The median price of non-foreclosed homes was much higher, at $167,000.

The townhouse/condo RSI dropped 31 percent from October 2008 to October 2009. That’s an improvement from 34 percent from September to September. However, the median price dropped significantly from $99,500 in September to $89,200 in October. Preliminary estimates show median townhome prices continuing to drop to $89,000 in November and $84,600 in December.

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