(See recent posts on Phoenix Case-Shiller Home Price Index.)
This graph I created from Case-Shiller data for metropolitan Phoenix seems to explain a lot of what we have seen happen to home prices in Phoenix, Arizona.
The lowest priced homes continued to appreciate significantly for 6 months or so after the middle and high priced homes had started to peak.
I suppose the lenient lending standards brought new buyers into the lower price range more than the other price ranges. In addition, I think a lot of buyers were simply priced out of the middle and high tier. If they wanted to buy a home, they were forced into the lower priced, but then still expensive, homes.
Last November, the lower priced homes were less than half their cost at the peak, and were similar to their prices in the summer of 2002.