Valley home prices holding steady
3-month trend indicates 27-month freefall may have come to an end, ASU expert says
25 commentsby J. Craig Anderson - Aug. 20, 2009 12:00 AM
The Arizona Republic
After a record-breaking 27 months of decline in the Valley's median home price, some of the most influential local real-estate analysts predict that home values finally have hit the bottom of the slide.
Arizona State University Professor Karl Guntermann reported Wednesday that the median price has held steady long enough to cautiously predict a coming period of relative price stability.
That doesn't mean all home prices will start to increase in the near future. Some houses, particularly the more expensive ones, should continue to decrease in value gradually, while less-expensive homes could hold steady or see moderate gains in value, Guntermann and other experts said.
Nor does it mean recent sellers are feeling any better about the amount they got for their homes. One couple who moved to Anthem recently liked the bargain they got here but still lamented the loss they took on a home in Washington state. Many sellers in the Valley felt the same pain.
"I lost $300,000 in equity on that home," 68-year-old Steve Trover said. "I got a great deal (on the Anthem home), but I'm not going to forget that $300,000."
Still, the overall rate of decline tracked by Guntermann's ASU Repeat Sales Index is finally showing improvement rather than deterioration.
"Clearly, the rate of decline has bottomed out and appears to be moving in the right direction," he said.
Caution is the guiding principle behind Guntermann's research. He doesn't call a trend a trend unless it has repeated itself at least three months in a row.
The positive trend first emerged in April and has remained consistent since, he said.
Guntermann tracks a sampling of homes that have sold multiple times in recent years, and he compares repeat sales of each home for changes in price.
In April, the median repeat home-sale price was 35 percent lower than it had been a year earlier. In May, the year-over-year difference decreased to 33 percent, and it has narrowed by an additional 2 percentage points each month since.
The actual median sale price has bobbed up and down slightly since April but has shown no major changes since then, Guntermann said. The median was $117,500 in April, and preliminary data show it was $119,000 in July, he added.
The median home prices peaked at $266,523 in June 2006, according to Phoenix-based Information Market.
Calling the bottom has been a subject of intense interest in metro Phoenix because much of the economy is tied to population growth and the building that springs from it.
Analyst Tom Ruff of Information Market said the ASU report validates a pronouncement he and colleague Mike Orr had made in April that home prices had hit bottom. "Lately, the news and the forecasts from leading economists have been much more positive, just as we said they would," Ruff said.
Still, he and Orr said the housing market entered a new, less encouraging phase in July. The number of foreclosures hit a new all-time high of about 5,300, and the median home price slipped a bit.
"July was unlike the first six months of the year," Orr said in his latest analysis. "We are now in a period of more uncertainty, with some more mixed signals coming from the data."
In Guntermann's preliminary data for June and July, the median price reached $120,000 in June and then decreased by $1,000 the following month.
Another issue on the horizon that could trigger a dip in home prices is an expected increase in home foreclosures in the coming months, according to leading auctioneers of bank-owned homes.
All of the local analysts interviewed said they expect the median home price to fall slightly in the coming months.
But housing analyst RL Brown and others noted that the Valley housing market always lags during the latter half of the year, and they advised homeowners not to panic.
Overall, Brown said he continues to be optimistic about the Valley's long-term prospects, even though he recognizes that economic factors such as employment and the availability of credit will have a significant influence.
One big improvement from a year ago, he said, is that home builders have sold off much of the excess inventory they had been saddled with when scores of prospective buyers canceled their new-home contracts.
Brown pointed out that despite all the economic hurdles, fears and past mistakes, nearly 10,000 homes have been sold each month in Maricopa County for the past three months.
"The economy is fraught with problems," he said, "but the fundamentals of this market are, by any reasonable definition, strong."