Metro Phoenix home appreciation slipped further in '89.

Metro Phoenix home appreciation slipped further in '89

Single-family homes in the Phoenix metropolitan area continued to appreciate during 1989, though even less than during 1988. Most townhouses depreciated during the year.

The median rate of appreciation for single-family homes declined to approximately 1.2 percent per year in 1989, down from 1.8 percent in 1988 and 2.4 percent in 1987. The single-family rate has fallen each year since the study began, dropping from 3.4 percent at the beginning of the decade. Most townhouses and condominiums (hereafter referred to as townhouses or townhomes) did not appreciate; the median townhouse sold during 1989 depreciated 1.7 percent per year, greater than 1988's decline of 0.5 percent per year. Appreciation rates of both single-family homes and townhomes were significantly lower than the 1989 Metropolitan Phoenix inflation rate of 4.9 percent.

Homes appreciated faster during 1981-1985 than from 1986-1989. Single-family homes appreciated 3 percent per year during the early part of the decade, but only 1.8 percent annually during the latter half. Townhomes appreciated 1.6 percent per year from 1981-1985, but prices declined 0.7 percent annually from 1986-1989.

The decline in the appreciation rate has further extended the length of time the typical seller utilizing the services of a real estate agent must own their home in order to break even. During 1989, the annual rate of 1.2 percent means that homeowners selling through a realtor, as the majority do, had to hold their home at least five years to break even. Agents fees, although usually necessary to sell the home, compounded the depreciation of townhouses.

Of all homes sold more than once between 1981 and 1989,…