Arizona State University

Home prices in the Phoenix area declined for the 18th straight month in August, breaking the Valley record for consecutive months of falling prices.

The latest data from the Arizona Sate University – Repeat Sales Index (ASU-RSI), which compared August 2008 sales data to August 2007 data, shows prices slumped 26 percent. Prices had dropped 24 percent between July 2007 and July 2008.

Karl Guntermann, the Fred E. Taylor Professor of Real Estate at the W. P. Carey School of Business at Arizona State University, calculates the ASU-RSI data with research associate Alex Horenstein. He says he doesn’t expect the declines to end in August. He estimates that when all the figures are in, similar drops will be seen for September and October.

The Valley has not seen a prolonged home-price drop like this in more than two decades. The previous record of 17 straight months of declines was set in the early 1980s, during a downturn that pummeled the savings and loan industry.

"This time around we’ve had a bigger crash," says Guntermann. "The most apparent reason was that the country experienced a bigger housing bubble this time, certainly much greater than in the 1980s. The bigger the bubble, the more severe the downturn."

During the recent bubble, Phoenix-area home prices inflated 75 to 80 percent, says Guntermann.

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 previous reports are available at the Division of Real Estate - Repeat Sales Reports. Further analysis is available at http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1713.