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Research shows record drop for Phoenix-area home prices


December 19, 2008

The Phoenix-area can claim a disturbing new record for the steepest-ever one-year decline in Valley home prices. The latest data from the Arizona State University – Repeat Sales Index (ASU-RSI) shows average prices dropped 28 percent between September 2007 and September 2008.

This marks the 19th straight month of declines in the year-to-year index, also a new record.

“The early 1990s saw a recession and fallout from the excesses of the 1980s in the real estate market,” 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 Alex Horenstein. “On a year-over-year basis, house prices declined from August 1990 to December 1991, a record 17 straight months. The current downturn has now reached 19 months, and the magnitude of the declines far exceeds those from the earlier period in all regions and cities of the Valley.”

Fortunately, the rate of decline is finally slowing across all areas of the Valley, except in Tempe. Double-digit drops in the Valleywide index started back in March, and they have started to level off.

“That good news must be tempered with the realization that the leveling off may stop with average prices down around 30 percent from the prior year,” says Guntermann. “It probably will take months for the index and actual home prices to stop declining.”

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 previous reports are available at the Division of Real Estate - Repeat Sales Reports. Further analysis is available at http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1724.