Ted Simons: Good evening, and welcome to "Horizon." I'm Ted Simons. At a press conference today, Governor Jan Brewer says she wants lawmakers to send her the budget bills they passed more than a week ago by 5:00 p.m. today. If they refuse, the governor says she'll ask the Arizona Supreme Court to force lawmakers to do so. In addition, the governor criticized senate President Bob Burns for walking away from budget negotiations last night. And she says she'll no longer insist on a temporary tax increase to balance the 2010 budget, but she says it may be needed in future years. A new Arizona State University study indicates that while housing prices in Arizona continue to decline, the rate of decline has slowed in each of the last three months. Experts say that could be a sign that Arizona's housing market has reached a turning point. Here with more on the study is Karl Guntermann, the Fred E. Taylor Professor of Real Estate at A.S.U.'s W.P. Carey School of Business. Good to have you here. Thanks for joining us.
Karl Guntermann: Nice to be here.
Ted Simons: This study is the repeat sales index. What does that mean?
Karl Guntermann: It's the most accurate way to measure changes in house prices because it pairs houses that sold in a given month with prior sales of those same houses and statistically those rates -- return of return are put together to develop an index and we measure price change in the index from a year ago.
Ted Simons: So there are signs that our housing market is starting to turn around. What are some of those signs?
Karl Guntermann: Well, the preliminary data shows that prices, the rate of price decline is slowing. The decline in March from March 2008 was down 37%. The preliminary for April is down 35% and from May, down 33%. So it's not a big sign of optimism, but in this market, it's a hopeful sign.
Ted Simons: We're free falling at a slower rate in other words?.
Karl Guntermann: Prices declining slower rather than fast.
Ted Simons: Why do you think?
Karl Guntermann: Well, prices have fallen dramatically, the March data, the total decline in Phoenix, in our data, it's something like 47% from the peak in the fall of 2006. And so prices have fallen to a point where a lot of buyers are now in the market. Investors are coming back. People who couldn't buy a house two, three years ago when prices were so high, are now able to buy houses. A lot of foreclosures are at discounted prices and the market is working, it's correcting.
Ted Simons: The market has been so bad for so long. Has this particular study, this index or any other studies or indices shown anything like this?
Karl Guntermann: No. No, the biggest previous decline in terms of duration was back in the early 1990s. Prices went down 17 months, but with the March data, prices are now down 25 months in a row.
Ted Simons: Where are the prices falling the most and why do you think that is?
Karl Guntermann: Well, we do the index, we calculate the index for regions and certain cities -- with the index for regions and certain cities and the worse area, north and southwest regions. Glendale and Peoria tend to show the biggest declines and they were areas that developed last in the cycle. And so they're the most remote locations.
Ted Simons: What about the mildest declines? Where are we seeing those?
Karl Guntermann: The mildest is places like Tempe because it's centrally located. The northeast region has declined least among the regions. Prices didn't go up as much in the northeast, and so they -- maybe for that reason in part haven't fallen as far.
Ted Simons: It still sounds like, though, there's a ton of inventory out there. Especially foreclosure inventory. A) Is that perception correct? And B) do we have to wait for that stuff to sell?
Karl Guntermann: I think the perception is correct. And unfortunately, yes, we do have to wait for the market to correct. It took several years for prices to get to the peaks and it's taken several years to get back to where they are now. And I suspect it will take another year or more for the market to really get back to any sign of what I would think of as stability.
Ted Simons: Median price in the valley -- median price in the valley?
Karl Guntermann: In March it was $119,000. And the preliminary for April was $117,500, and May, $115,000.
Ted Simons: And that corresponds to how far back? What kind of marker are we looking at? 1990’s?
Karl Guntermann: Well, late 1998. Those median prices would go back to late 19 -- 1998.
Ted Simons: So does that mean that if you are in the market to buy a home, or if you’re sitting on a home thinking of selling it., Do you have to pretty much go back and think along the lines of what was going on in 1998, 99’, those prices?
Karl Guntermann: For a typical house. Inflation is a problem. On the other hand, in Phoenix, you can buy the typical house for 1998 prices.
Ted Simons: So there is some optimism. It's still tempered by a whole lot of correction that needs to go on.
Karl Guntermann: That's right. If you own a house, you've seen a lot of paper equity disappear. If you're in the market to sell, this isn't a good time. The number of people who are waiting for the market to improve before they sell their house and unfortunately, my judgment is that's still going to be some time.
Ted Simons: Thanks for joining us. We appreciate it.
Karl Guntermann: My pleasure.