December brought us additional negative sounding real estate news, among recent headlines:

– In Case Shiller’s index published Dec 28th, 2010 and reporting on October 2010 median home prices for 20 US cities, we see that in Phoenix, the median home price dropped 1.1% from the previous month, and is down 4.3% from one year earlier.

-In WSJ’s Home Prices Still Too High (12/30/2010), Peter Schiff muses that based on Standard & Poor’s Long Term Case-Shiller index, the average10-city home pricing gain since 1998 has been 173%. But if the average yearly gain  had been the traditional 3.35% (the average seen between 1900-2000), prices today would have been lower than they are now – perhaps even 20% lower.  Given excess inventory and other factors – he positions that is where prices will go. 

This is a thoughtful and reasoned argument.  But let’s remember that the article is summarizing the market across the nation.  Let’s ponder the meaning as it applies locally – where does Phoenix fit into this picture?  This same index (please click Case-Shiller link above) shows the  Phoenix median at the end of October  only 6% over that of 2000.   The monthly reported index utilizes a basis point of 100 for  the year 2000.  Thus, the October 2010 level of 105.97 says that our median pricing is 5.97 percent higher than the number reported 10 years earlier. 

Prices are soft, and may become softer, but our market has already undertaken a huge correction.  Considering our already steep correction to nearly that of  2000 levels, perhaps any further pricing corrections will be much less than the 20% heralded in the above article.   In addition, and as mentioned here last month, our expert at ASU, Karl Guntermann,   says of additional pricing drops: “comparing it with the market’s initial plunge it would be like looking at a pothole next to a sinkhole.”

Our market continues to grapple with the expiration of the housing tax credits, higher inventory, and a high unemployment rate.  So, prices are still soft.  Bringing supply into balance with demand will take time, and much depends on the economy at large, the jobs market, as well as mortgage loan availability and rates.   2011 will not bring a rapid return to a more balanced market, but we hope to report in early 2012 that though improvement was modest and not fast-paced, it became measureable.  

Underscoring all: although interest rates are edging up, they still qualify as “low.”  Amazing opportunity continues.