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Greater Phoenix August Resale Market Housing Price Increases Slow


September 14, 2005

MESA, Ariz. — The local resale home market improved slightly in August 2005 with 10,700 recorded sales, while it was 10,200 sales for July 2005. It was, however, below last year’s 11,275 sales. In 2005, there have been 78,935 sales, in contrast to the 2004 year-to-date of 68,020 sales.

The median home price set another record at $258,700, in contrast to $255,000 for July 2005. While this was a 46 percent increase over last year’s $177,500, it did represent a slow down for the month-to-month changes in 2005 from 4.4 percent to 1.5 percent.

Even with some slowdown in the monthly growth rate, affordability remains an issue. The average 30-year mortgage for August 2004 was 5.6 percent, while it was 5.5 percent for August 2005. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home a year ago was $865, while it would be $1,250 for August 2005. The ever higher home prices tend to sustain optimistic growth assumptions about the market. Thus, both investors and owner-occupants seem to be buying on future expectations about continued appreciation to provide for profit and/or re-financing opportunities.

Even with lower interest rates, the higher home prices are seriously impacting affordability, especially for young and minority households working to purchase their first home to enter the housing game and to start moving up in housing. Further, there is increasing concern that teachers, policemen or firemen can’t afford to live in the communities where they work. In searching for affordability, people are moving to the outer fringes where commutes are becoming increasingly expensive in light of higher gasoline prices and longer commute times.

According to Jay Butler, director of the Arizona Real Estate Center at Arizona State University’s Polytechnic campus, with declining affordability, there has been an increased reliance on creative mortgage financing to allow people to buy, both owner-occupants and investors. The available instruments run the gamut from low interest rate adjustable mortgages, to interest only mortgages, to ones that allow people to select how much to pay each month (the option payment plan).

"While there is nothing inherently wrong with these atypical instruments, they tend to rely on a steady economic environment, stable interest rates and growing housing market," says Butler. "If any of these conditions should change, homeowners could have difficulty in fulfilling the conditions of the loan and could end up loosing their homes."

Since the Greater Phoenix area is so large, the median price can range significantly from $630,000 in North Scottsdale to $121,250 in the Sky Harbor area of the city of Phoenix. For August 2005, 20 percent of all recorded sales were for homes priced from $125,000 to $199,999, 38 percent for $200,000 to $299,999 and 36 percent for homes priced over $300,000.

With 1,975 sales for August 2005, the resale townhouse/condominium market also improved slightly from 1,905 sales in July 2005, while it stood at 1,885 for August 2004. The 2005 year-to-date is 14,805 units, while it was 12,665 for 2004 year-to-date. This housing form has become popular with investors and households looking for an affordable entry into the housing market. This popularity has driven the median home price from last year’s $114,000 to the current August 2005 $159,000.

The median square footage for a single-family home recorded sold in August 2005 was 1,640 square feet, which is smaller than the 1,700 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,105, which is smaller than the 1,135 square feet reported a year ago.

  • In contrast to August 2004, recorded sales in the city of Phoenix increased from 2,990 sales to 3,050 sales, while the median sales price increased to $206,000 from $143,500. Since Phoenix is a geographically large city, the median prices can range significantly such as $121,250 in the Sky Harbor area to $320,000 in the Union Hills area. The townhouse/condominium sector improved from 540 a year ago to 615 sales while the median price increased from $103,000 to $136,200.
  • While the Scottsdale resale home market declined from 1,050 to 780 recorded sales, the median sales price continued its upward movement by increasing from $376,000 a year ago to $555,000. The median resale home price is $667,450 in North Scottsdale and $291,500 in South Scottsdale. The townhouse/condominium sector in Scottsdale also declined from 400 to 365 sales, but the median sales price increased from $171,640 to $245,125.
  • The Mesa resale housing market decreased from 1,415 to 1,290 sales, while the median price increased from $160,000 a year ago to $240,000. The townhouse/condominium sector also declined from 330 to 325 sales, but the median home price increased from $96,500 to $138,000.
  • Glendale decreased slightly from 860 a year ago to 855 sales, but the median sales price increased from $163,810 to $240,000. The townhouse/condominium sector grew from 75 to 100 sales, while the median sales price increased from $85,600 to $115,500.
  • In comparison to a year ago, the Sun City resale market slowed from 175 to 155 sales, with the median sales price increasing to $193,600 from $138,700. Resale activity in Sun City West also declined from 80 to 75 recorded sales, but the median sales price increased from $160,000 to $234,000. The townhouse/condominium market in Sun City decreased from 105 to 85 recorded sales, while the median home price increased from $85,450 to $138,450. In Sun City West, activity decreased from 30 to 20 sales, but the median sales price increased from $122,500 to $160,000.
  • The resale market in Gilbert decreased from 765 a year ago to 665 sales, but the median sales price increased from $210,000 to $309,950. The townhouse/condominium market grew from 25 to 45 sales as the median sales price increased from $137,000 to $196,500.
  • For the city of Chandler, the resale market slowed from 830 to 780 recorded sales, while the median sales price increased from $190,000 to $289,600. The townhouse/condominium market improved from 75 to 100 sales and the median sales price increased from $112,250 to $164,375.
  • The resale market in Tempe decreased from 280 to 270 sales, with the median sales price increasing to $266,000 from $185,000 a year ago. The townhouse/condominium sector increased from 130 to 140 sales and the median sales price increased from $121,000 to $176,500.
  • The highest median sales price was in Paradise Valley at $1,276,000 with a median square foot house of 3,225 square feet.
  • In the West Valley, the following communities represent 11 percent of the resale market, while it stood at 9 percent a year ago.
    • Avondale grew from 255 to 280 sales, with the median price moving from $163,000 to $253,000.
    • El Mirage improved from 155 sales ($132,500) to 200 sales ($219,340).
    • Goodyear was stable at 195 sales, while the median price increased from $191,500 to $283,250.
    • Surprise increased from 400 sales ($159,950) to 450 sales ($258,345).