Research Stories

by Debbie Freeman

Researchers at Arizona State University’s W.P. Carey School of Business are all about the numbers. They track numbers and crunch numbers in order to identify trends and make forecasts. Housing prices in the Phoenix metropolitan area provide just one set of numbers to study. The current news is positive. For the first time since 2007, Phoenix-area home prices increased from one month to the next. A new report from ASU showed a slight 0.8 percent bump up in Phoenix-area home prices from May to June for this year.

The Arizona State University-Repeat Sales Index (ASU-RSI) measures changes in average Phoenix-area home prices from year to year. The new report for June 2008 to June 2009 showed the small increase for average home prices. Karl Guntermann says that the numbers also offer evidence that the worst appears to be over, for now, in terms of housing price plunges.

Guntermann is the Fred E. Taylor Professor of Real Estate at Carey School. “It is now clear that the worst is past in the home-price rate of decline and that prices were falling most rapidly back in February and March,” he says. “However, it must be remembered that the current housing market is still quite volatile, so this conclusion must be tentative.”

Despite the small boost in prices between May and June, the new report shows an overall 31-percent decline for the entire year from June 2008 to June 2009. However, this is an improvement from the 33-percent decline recorded from May 2008 to May 2009. It’s also better than the 35-percent drop from April to April. Preliminary estimates for July and August show things continuing to get better. Guntermann says that projections indicate 28- and 25-percent declines, respectively.

The index has now gone down for 28 consecutive months, eclipsing the previous record of 17 months, set in the early 1990s. Prices have decreased 49 percent from their peak in the Phoenix area in mid-2006. The worst drops have occurred in Glendale and Peoria, while Scottsdale and Paradise Valley have fared the best. The upper end of the market suffered the most back in the early 1990s. The current housing crisis has hit the lower end of the market hardest.

The median price of Phoenix-area homes in June 2009 was $122,000, which is up from $119,000 in May. Preliminary median prices for July and August are at $125,000 and $127,000, respectively.

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 http://knowledge.wpcarey.asu.edu.