Phoenix commercial real estate market levels off


December 15, 2010

Home prices keep dropping

New reports show the Phoenix housing market is back on a downward slide, while the commercial real estate market finally seems to have leveled off. The new residential and commercial reports both come from ASU's W. P. Carey School of Business, and the commercial study predicts some positive movement in 2011. Download Full Image

“If the historical pattern is followed, which appears to be the case, 2011 should see a significant improvement in commercial prices, basically a recovery from the distressed levels of 2009 and 2010,” said Karl Guntermann, the Fred E. Taylor Professor of Real Estate, who wrote the reports with research associate Adam Nowak. “However, the improvement in the commercial market for the next few years is likely to occur fairly gradually, given the expected recovery in the Arizona economy and unusually high vacancy rates in all sectors of the commercial market.”

Guntermann produces both the monthly Arizona State University-Repeat Sales Index (ASU-RSI) on housing and the quarterly index focused on the commercial real estate sector. On the residential side, the ASU-RSI measures annual changes in average Phoenix-area home prices.

The latest housing index reveals an unfortunate fourth month in a row of year-over-year declines. The preliminary data for November 2010 shows a 7-percent drop in average prices from November 2009. Previous reports documented a 6-percent dip from October to October, a 4-percent decline from September to September, and a 2-percent drop from August to August. Before that, the market hadn’t been in negative territory since March.

“Given the pattern that is emerging, it is likely declines will continue for at least the next several months,” Guntermann said. “The recent improvement in Phoenix employment is an important step in getting the housing market back to normal, but the process will continue through 2011 and beyond. Markets don’t move smoothly in one direction, so perhaps it should not be surprising that another period of price declines has begun.”

Guntermann does point out that in 2010, the housing market finally reached some stability after almost three years of declines, and he believes the worst is over.

“With the economy gradually recovering and the foreclosure problem past its peak, the odds are good that the housing market will end 2011 a lot better than it will be beginning it,” Guntermann added.

The overall median price for home sales in the November index was $122,300. Since 2009, the median price has remained between $122,000 and $135,000. The median price specifically for foreclosed homes in November was estimated at $106,000, a new low for the year. This may signify that foreclosed homes are no longer the biggest bargains on the market.

Townhouse/condo prices continue to dramatically drop at a rate of around 20 percent per year. The median price for Phoenix-area townhouses/condos in November was just $63,000.

On the commercial side, Guntermann shows that historically, the commercial real estate index follows the trends of the residential side. For example, the residential index peaked in mid-2006, almost two years before commercial real estate prices peaked.

“The commercial market is tied more directly to economic fundamentals, which remained strong well into 2007, explaining why commercial prices lagged the residential market,” Guntermann said. “After bottoming out at the end of 2009, the commercial index has moved in a narrow range, indicating that commercial prices have stabilized, but at approximately where they were prior to the great expansion.”

Commercial prices peaked at an annual rate of 28 percent in the third quarter of 2006. They, then, experienced an unprecedented decline that reached an annual rate of 40 percent by the end of 2009. However, things have leveled off, with essentially no change from the third quarter of 2009 to the third quarter of 2010. Interestingly, the residential market plunge lasted more than three years, but the commercial drops lasted less than a year and a half.

Both the commercial and residential indices are based on repeat sales, the most reliable way to estimate price changes in the real estate market. Repeat sales compare the prices of a single property against itself at different points in time, instead of comparing different homes and commercial properties with different quality factors.

The new ASU-RSI reports can be found at http://wpcarey.asu.edu/realestate/housing-market-reports.cfm">http://wpcarey.asu.edu/realestate/housing-market-reports.cfm">http://wpc... and http://wpcarey.asu.edu/realestate/commercial-market-reports.cfm">http://wpcarey.asu.edu/realestate/commercial-market-reports.cfm">http://.... Further analysis is also available from Knowledge@W. P. Carey, the business school’s online resource and biweekly newsletter, at http://knowledge.wpcarey.asu.edu.">http://knowledge.wpcarey.asu.edu">http://knowledge.wpcarey.asu.edu.

Saks appointed to National Conference of Lawyers and Scientists


December 15, 2010

Michael Saks, Regent’s Professor of Law and Psychology at the Sandra Day O'Connor College of Law, has been appointed to serve as a member of the National Conference of Lawyers and Scientists. His term begins in February and runs for three years.

The National Conference of Lawyers and Scientists was established in 1974 as a joint standing committee of the American Association for the Advancement of Science and the American Bar Association’s Section of Science and Technology Law. Download Full Image

Its goals are to promote a better understanding of science among lawyers and judges and of the legal system among scientists; to improve communications between lawyers and judges on the one hand and scientists and engineers on the other; to monitor and examine emerging public policy issues of concern to both lawyers/judges and scientists/engineers; to examine such issues cooperatively and, where appropriate, to recommend policy alternatives to their respective organizations and others relating to such matters; to sponsor joint symposia, programs and studies; and to identify and collaborate with groups from other nations interested in exploring similar subjects.

It has been at the leading edge of exploring issues at the interface of science and law, including scientific misconduct, genetic enhancement, the ethical, legal, and policy implications of genetic testing, and emerging issues in neuroscience.

Saks’ research focuses on empirical studies of the legal system, especially decision-making; the behavior of the litigation system; and the law’s use of science. He is the fourth most-cited law-and-social-science scholar in the U.S., and has authored approximately 200 articles and books. Courses he has taught include criminal law, evidence, law and science, property and torts.

Judy Nichols, Judy.Nichols">mailto:Judy.Nichols@asu.edu">Judy.Nichols@asu.edu
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