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Greater Phoenix Resale Home Market Continues Trend to Normalcy


April 11, 2006

Following a very typical pattern, the greater Phoenix resale market has rebounded slightly in March 2006 with 7,265 sales. This improvement over the 5,455 sales for February 2006, but well below last year's 10,035 sales. Even with the improvement in activity, first quarter 2006 with 17,980 sales is below 27,325 sales for a year ago and 22,090 sales in fourth quarter 2005.

"This is the weakest quarter since first quarter 2003 with 15,030 sales," said Jay Q. Butler, director of the Arizona Real Estate Center at ASU's Polytechnic campus. "March tends to be good month as its represents closed transaction from people who moved into the Valley during the early part of the year and those that took time during the holidays to look for a new home."

While the trend toward normalcy appears to be continuing, the overall direction of the local resale housing estate market will probably not become clearer until into the second quarter.

The primary news of last year's housing market was the rapid rise in the median home price from $194,000 in January to $260,000 in December. However, since the record of $263,000 was set in September, the growth rate had been disappearing with the median price being $263,000 in March, which is sill above last year's $213,000. For the first quarter of 2006, the median home price was $260,190, above last year's $203,000, but only slightly above the $260,000 for fourth quarter 2005.

Along with a higher median home price, mortgage interest rates are higher than a year ago. Thus, affordability continues to be an issue. The average 30-year mortgage for first quarter 2005 was 5.4 percent, while it was 5.8 percent for first quarter 2006. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home increased from $970 to $1,300.

For the last year, the ever higher home prices have drawn people into the market based on continued optimistic growth assumptions about future prices. Thus, both investors and owner-occupants have been buying on future expectations about continued appreciation to provide for profit and/or re-financing opportunities. If home prices continue to be stable or even decline in some areas, owners may increasingly bring homes to the market, in order to lock in profits.

In order to allow people to buy their own or investment homes, there has been an ever increasing reliance on creative mortgage financing. 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. 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 $700,000 in North Scottsdale to $150,000 in the Sky Harbor area of the city of Phoenix. For March 2006, 17 percent of all recorded sales were for homes priced from $125,000 to $199,999, 43 percent for $200,000 to $299,999 and 39 percent for homes priced over $300,000.

Over the last few years, the townhouse/condominium market has had increased popularity for owner-occupancy, especially for young and minority households, and investors. However, sales activity followed a pattern similar to the single family market with an increase from 1,260 sales for February 2006 to 1,750 sales for March, but still below last year's, 1,880 sales. For the first quarter 2006, there was 4,235 sales, while there was 5,075 sales a year ago and 4,710 sales in fourth quarter 2005. Even the median home price declined from a record $175,000 in February 2006 to $173,000, but still above last year's $130,000.

The median square footage for a single-family home recorded sold in March 2006 was 1,615 square feet, which is smaller than the 1,660 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,095 square feet, which is smaller than 1,145 square feet reported a year ago.

  • In contrast to March 2005, recorded sales in the city of Phoenix decreased from 2,835 sales to 2,300 sales, while the median sales price increased to $220,000 from $165,000. Since Phoenix is a geographically large city, the median prices can range significantly such as $150,000 in the Sky Harbor area to $326,000 in the Union Hills area. The townhouse/condominium sector increased from 410 to 570 sales while the median price increased from $113,750 to $149,025.
  • While the Scottsdale resale home market declined from 810 to 550 recorded sales, the median sales price continued its upward movement by increasing from $465,500 to $595,000, while it was $575,000 in February 2006. The median resale home price is $700,000 ($657,800 in January) in North Scottsdale and $319,250 ($315,500 in February) in South Scottsdale. The townhouse/condominium sector in Scottsdale also decreased from 420 to 380 sales, but the median sales price increased from $250,000 to $265,000.
  • The Mesa resale housing market declined from 1,125 a year ago to 830 sales, while the median price increased from $189,000 to $243,500 ($245, 000 in February). The townhouse/condominium sector also fell from 270 to 240 sales, while the median home price increased from $108,000 to $153,250.
  • In Glendale, the resale home market decreased from 695 a year ago to 570 sales, but the median sales price increased from $195,000 to $251,250 ($250,000 in February).The townhouse/condominium sector improved from 85 to 100 sales, while the median sales price increased from $91,420 to $143,850.
  • In comparison to a year ago, the Sun City resale market fell from 215 to 150 sales, the median sales price increased to $210,000 from $166,000. Resale activity in Sun City West also fell from 95 to 65 sales, but the median sales price increased from $189,900 to $247,500.The townhouse/condominium market in Sun City declined from 140 to 105 recorded sales, while the median home price increased from $113,100 to $144,950. In Sun City West, activity fell slightly from 25 to 20 sales, but the median sales price increased from $130,000 to $183,500.
  • The resale market in Gilbert decreased from 605 to 355 sales, but the median sales price increased from $252,820 to $322,500 ($341,000 in February). The townhouse/condominium market remained at 25 sales as the median sales price increased from $159,000 to $210,000.
  • For the city of Chandler, the resale market slowed from 680 to 510 recorded sales, while the median sales price increased from $239,900 to $295,000 ($299,900 in February). The townhouse/condominium market declined from75 to 55 sales and the median sales price increased from $126,750 to $175,000.
  • The resale market in Tempe decreased from 230 to 190 sales, with the median sales price increasing to $288,400 ($300,000 in February) from $215,900. The townhouse/condominium sector slowed from 110 to 90 sales and the median sales price increased from $135,000 to $190,500.
  • The highest median sales price was in Paradise Valley at $1,595,000 with a median square foot house of 3,300 square feet.
  • In the West Valley, the following communities represent 8 percent of the resale market, which is down from the 10 percent of a year ago.
    • Avondale fell from 235 to 160 sales with the median price moving from $205,000 to $256,000 ($261,000 in February).
    • El Mirage decreased from 120 to 60 sales, while the median home price went from $170,000 to $220,000 ($221,000 in February).
    • Goodyear declined from 225 to 95 sales, while the median price increased from $231,000 to $281,000 ($289,000 in February).
    • Surprise decreased from 450 sales to 285 sales, while the median price increased from $208,000 a year ago to $255,500 ($260,750 in February).