The Phoenix real estate market began to turn around in 2009, but the improvement was driven by foreclosures and by investors drawn to the resulting low prices, according to the latest ASU-Repeat Sales Index (ASU-RSI) report.
While some measure of price stability is returning, Phoenix remains an artificial market because of the large number of foreclosures and the significant presence of investors, writes real estate Professor Karl Guntermann, who compiles the ASU-RSI with the assistance of research associate Adam Nowak. Uncertainty about the timing of recovery in the local economy coupled with new foreclosures, even if at a slower rate, makes it difficult to predict the trend of house prices in 2010 with much confidence.
The ASU-RSI compares current house prices to the value of the same houses a year ago. The combination of recently rising house prices and the low prices of a year ago suggests that prices will likely turn positive around the middle of 2010, Guntermann says. He added that it doesn't necessarily follow that the appreciation will continue, however, because of the nature of the market.
The return of more normal housing conditions, which could lead to increases in house values, would depend on improving economic conditions that both reduce foreclosures and increase confidence among future buyers, Guntermann writes.
Housing prices declined 23 percent in September compared to September 2008 -- a slight improvement over August, when prices declined 25 percent, and July, when prices dropped 28 percent. Looking ahead, Guntermann expects that the October data will show a 20 percent decline and a 17 percent drop in November.
Lower priced homes actually dropped 33 percent in September, and house prices at the higher end of the market dropped 18. Guntermann pointed out that the distance between the two segments has narrowed in recent months, reflecting the gains made in the lower-price end of the market. As the market stabilizes, he added, the month-to-month changes should swing only slightly.
The overall median price was up in September to $130,000 from $126,000 in August. The projections for October and November are calling for continued improvement -- $131,000 and $135,000 respectively. On the low end of the market, the median price was $93,000 in September at $255,000 on the high end. The overall median price hit bottom in April at $117,500 and has been improving ever since, totaling a 15 percent increase.
While the increases reflect a clear trend, Guntermann writes, this is still an unstable housing market substantially influenced by foreclosures on the supply side and investors on the demand side.
For the first time, he adds, the townhouse/condominium index declined at a slower rate. The September decline was 34 percent, compared to 36 percent in August and July. The median price in September was $99,500, but the projection for October and November is $89,000.
While the year-to-year decline in the index may be slowing, townhouse/condominium prices appear to be taking a step down after four months with a median price just under $100,000 Guntermann says.