According to a study from the Arizona State University W.P. Carey School of Business, the “ASU-RSI” (ASU Repeat Sales Index) average home prices in the Phoenix metro area dropped 13% year-over-year in March.
This is the first double-digit “ever” (ever is a really long time. I suspect it’s the first double digit decline in this metric’s history — I’m trying to determine how long that is, and/or what Professor Karl Guntermann considers “ever”).
The ASU-RSI is very similar to the fairly widely known S&P/Case-Schiller Index. Both track repeat sales of the same home over different periods of time. It’s thought by many that using repeat sales is a more reliable method of monitoring market changes as in effect, it is comparing “apples to apples”.
I spoke at some length yesterday with Misty Williams, the real estate reporter for the East Valley Tribune for her article on this story. (Always a pleasure Misty!.) Much of our discussion centered around the impact of REO (bank owned) properties and their impact on the Phoenix real estate market. I hadn’t read Guntermann’s analysis yet, but it looks we do agree that REOs continue to drag down prices. But as I said to Misty, we’ve seen increased buyer activity, and their is no question that REO properties are beginning to move much more swiftly than they were just a short time ago. Aggressive bank pricing and multiple offers are the norm now in many situations.
The $50,000 dollar question is and remains, how long will this last? Yes, buyers are coming into the market. But there is still a ton of short sale and REO inventory out there. Until some of that inventory bleeds off, buyers will still be clamoring for and maintaining the (unrealistic)perception of getting the short sale or REO property for pennies on the dollar.
Fortunately, as difficult as it is, sellers seem to be getting more realistic about the current conditions. We’re seeing far fewer ridiculously over-priced listings, and not every buyer wants an REO or has the patience and fortitude to put up with the crap lenders consistently spew on short sales. This market will correct. It may just be awhile. Personally, I think we will continue to see price declines through the remainder of the year, and a leveling through next year before returning to a more normal gradual appreciation rate.
And I reserve the right to be completely wrong.