Expert: Median price of houses could dip to $100,000

Sales boom at low end of Valley home market driving number down

by J. Craig Anderson - Feb. 8, 2011 05:41 PM

The Arizona Republic

The service that lists Phoenix-area homes for sale is expecting the median home-sale price to drop as low as $100,000 during the next three months.

The supply of homes flowing onto the market is increasing, while sales have declined, according to Bob Bemis, chief executive of the Arizona Regional Multiple Listing Service, which real-estate agents in the Valley use to list homes for sale.

Bemis said those trends are likely to exert downward pressure on prices in the coming months. January's median sale price was $110,000, the lowest it has been in about a decade.

Home-sales activity in the Phoenix area declined by about 22 percent from December to January, the second-biggest drop in the past decade for those two months, Bemis said. The worst decline was a 24.4 percent fall, from December 2008 to January 2009.

The listing service noted 8,401 sales in December and 6,541 sales in January. Although down compared with December, January sales were 13 percent higher than they had been a year earlier, Bemis said.

Meanwhile, he said, the number of homes being listed for sale increased by 30 percent from December to January.

Based on those factors, and the fact that 70 percent of all January sales were foreclosure-related, Bemis said he had little choice but to conclude further price drops are imminent.

"You could easily see the median price go below $105,000 or even as low as $100,000," he said.

The January median home price has declined by 50 percent since 2008, when it was $220,000.

"We have a huge hole that we have dug ourselves into," Bemis said.

One reason the median price was so low, he added, is that there were few sales transactions happening in the middle range of the market, from about $250,000 to $700,000.

Bemis referred to that group, to which he belongs, as "the great, forgotten middle class," because all activity is focused on homes at the low end of the price spectrum.

He added that the market's high end is a different beast altogether, with most homes being bought and sold for cash among the extremely wealthy.

The market for upper-middle-class homes has been almost completely frozen because of scant buyer interest and difficulty obtaining loans. Bemis said that market will not start moving again until problems at the low end have been resolved.

It's not likely to happen in 2011, he added.