The small increases in Phoenix housing prices that began this spring will likely continue for only a month or two longer, then flatten out for an extended period, said Karl Guntermann, a professor of real estate who calculates the ASU-Repeat Sales Index (ASU-RSI) at the W. P. Carey School of Business.
The overall index shows the Phoenix metro housing market slowly improving, but several segments are still slumping. According to the latest index, the market overall floated up 0.07 percent in April, year-over-year, and preliminary data for June has that increase rising to 1.8 percent. The upward trend is not expected to last, however.
The overall median price for sales that were included in the April index was $135,000 and the preliminary figure for June is $133,000, demonstrating stability for the past four months. The median price moved back up to $130,000 last September and has fluctuated within $5,000 of that figure since then, said Guntermann.
On the bright side, homeowners at the lower end of the price spectrum, who were hard hit in the downturn, will continue to see improvement. Year-over-year, prices gained 9.2 percent in April, and are projected to gain 11.5 percent by June. Guntermann expects this sector to see price increases for the rest of 2010 -- and unless conditions change -- price stability in 2011.
On the down side, the traditional sales sector -- homes that have not been in foreclosure -- is experiencing increasing price declines in the year-over-year comparisons. April 2010 compared to April 2009 showed prices declining by 8.7 percent. In June, preliminary data is showing acceleration to 10.5 percent.
Drilling down to details uncovers the variations in the market.
When sales are divided by price, the high end of the market is still drifting down, in contrast to those lower-priced homes. In the year-over-year comparison, April prices were 3 percent lower than April 2009; in June the decline is expected to be 2.2 percent. Guntermann says that the higher priced segment is likely to show small declines on an annual basis through the rest of 2010.
The foreclosure/non-foreclosure segments are also heading in opposite directions. Prices for foreclosures turned up in March, increasing 4.6 percent, with a gain of 5.2 percent in April and 5.0 anticipated in June. The foreclosure RSI has been relatively flat this year which means that recent increases in prices are not likely to continue past this summer, Guntermann said.
The median price for foreclosed houses in April was $120,000 -- up substantially from a low of $97,000 last May, but the preliminary median for June is essentially the same at $119,000. Prices since October 2009 have been in the range of $115,000 to $120,000 and may well remain in that general range for the foreseeable future unless there is a significant change in the number of houses going into foreclosure or a turnaround in the Phoenix economy, Guntermann said.
But non-foreclosure prices are declining -- the index is significantly lower than a year ago. In April the year-over-year decline was 8.7 percent, and is expected to be 10.5 percent in June.
This means that house prices in this segment of the market are likely to decline for the foreseeable future, Guntermann said. Whether the rate of decline begins to slow or continue near double-digit rates probably depends more on an improving Phoenix economy than on just housing market factors per se.
The townhouse/condo segment of the market appears to be leveling off but at an annual rate of decline just under 20 percent. Prices declined by 19.3 percent, beginning with the March data, and in April the decline was 19.4 percent, slowing only slightly to 18.8 percent by June. The preliminary median price of townhouse/condo units in June declined to $73,000. This represents another step down in price from the low $80,000's where prices had been for the past several months, Guntermann said.
Guntermann reports that the overall increase in prices has resulted in three regions -- Central, Northwest and Southwest -- logging positive numbers for the year-over-year comparisons for the first time in April. Northeast and Southeast are still posting declines, however, and this is likely to continue for the rest of the year, according to Guntermann.
All cities in the metro area posted slower declines in price in April compared to March, with Glendale and Peoria nearly attaining stability. Based on index values for the past year, it is likely that those two cities along with Mesa will show little in the way of price gains or losses for the balance of 2010, Guntermann said. In contrast, the rest of the cities are likely to post small declines on an annual basis at least through the end of the year.
Research Associate Adam Nowak assists in compiling the ASU-RSI.
Cities included in regions:
- Northeast -- Carefree, Cave Creek, Fountain Hills, Paradise Valley, Scottsdale
- Northwest -- El Mirage, Glendale, Peoria, Sun City/Sun City West, Surprise, Youngtown
- Central -- Phoenix
- Southeast -- Apache Junction, Chandler, Gilbert, Higley, Mesa, Queen Creek, Sun Lakes, Tempe
- Southwest -- Avondale, Buckeye, Goodyear, Litchfield Park