ANN ARBOR—Real house prices in metropolitan Detroit have fallen to 1988 levels, says a professor at the University of Michigan’s Ross School of Business.

According to Dennis Capozza, U-M professor of finance and real estate and the Dykema Professor of Business Administration, the last four years of declining home prices in the Detroit area wiped out real price gains from the previous 10 years (1995-2005).

“Detroit metro was the canary in the coal mine this cycle, with falling house prices arriving earlier than in other metros,” said Capozza, founding principal of University Financial Associates, a risk-management firm that forecasts mortgage and consumer loan performance. “But other metros that have already or will soon converge to pre-bubble real prices include Las Vegas, Phoenix, the inland California metros and many south Florida metros.”

Capozza, who says declining home prices will continue for most metro areas nationally, predicts that stabilization will eventually occur at real prices below the lowest levels of the last 20 years in many metro areas.

Ross School of BusinessUniversity Financial Associates