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Study shows home prices finally may be bottoming out

May 01, 2009

Phoenix-area homeowners can start celebrating a small light at the end of the tunnel, when it comes to house prices. While the latest numbers from the Arizona State University-Repeat Sales Index (ASU-RSI) still show a record decline, forecasts then show a slight upturn.

“This may be the long awaited signal that the housing market may be beginning to change course,” 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. “This index has already fallen for about two years, eclipsing the previous record of 17 months from 1989 to 1991, so we’re happy to see a glimmer of hope.”

The index measures changes in average Phoenix-area home prices from year to year. The latest numbers show a record 35-percent drop from January 2008 to January 2009. Preliminary forecasts then show an even steeper 37-percent drop from February 2008 to February 2009. However, the March 2008 to March 2009 index starts moving in the other direction, with a slightly smaller 36-percent decrease.

“Another positive here is that home affordability has increased in the Phoenix area,” says Guntermann. “It is now possible to buy houses at 1999 prices. Prices at these levels are a major factor in the recent increase in selling activity in the housing market.”

Average Phoenix-area home prices hit a peak after increasing by 76 percent from January 2004 to July 2006. Since then, the ASU-RSI has declined 42 percent.

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