Greater Phoenix resale home market enters holiday slowdown

October 16, 2007

MESA, Ariz. — The 3,050 recorded sales in September 2007 heralds in the local resale housing market’s traditional period of doldrums, due primarily to the holidays and the desire not to move children during a school year. The doldrums should begin to let-up in early 2008, with improvement in recorded sales becoming more evident in March. The activity of September followed August 2007 at 4,240 sales and was below last year’s 4,875 transactions. The month of September brought the year-to-date total to 40,800 sales, which is well below the 52,390 for 2006 year to date and 88,750 sales for 2005 year to date.<separator></separator>“Even in an uninspiring market, there are potential buyers that cannot get the needed financing due to tighter mortgage underwriting guidelines,” said Jay Q. Butler, director of Realty Studies in the Morrison School of Management and Agribusiness. “This could be especially true in the move-up market.”<separator></separator>The combination of large inventories and low interest rates have enabled people to purchase more expensive homes, which is one reason the county median price has remained fairly stable. However, continuing concerns in the nonconforming mortgage market (mortgages above $417,000) have begun to adversely impact the move-up market. Last year, 39 percent of the resale homes sold for more than $300,000, while it was 35 percent for September 2007.<separator></separator>Foreclosures and new homes are providing a competitive alternative to the resale home in many areas of the market. New home builders have been aggressively pursuing buyers through incentives such as specially priced up-grades, free pools and gift cards.<separator></separator>“Because of these tactics, the 2007 resale housing market is showing signs of increasing weaknesses that could drive it below the expectations of even a few months ago,” said Butler.<separator></separator>Much like the ever-increasing sales activity of the last few years, the rapid improvement in prices has disappeared. The median home price in September was $250,000 in comparison to $255,000 for August and last year’s $256,900. The most evident impact of lower prices is improved affordability. Although mortgage interest rates increased slightly from last year’s 5.9 percent to 6.0 percent, the lower median price allowed the monthly payment to decrease from last year’s $1,325 to $1,275.<separator></separator>Changes in median prices can vary tremendously throughout the valley. For the West Valley the median price has fallen from $240,000 in September 2006 to $216,930. On the other hand, homes in the North Mesa area have gone from last year’s $233,000 to $226,000. While some areas have declining prices, other areas are increasing or remaining fairly stable, especially the mature neighborhoods that are close to freeways, retail and schools. Since the Greater Phoenix area is so large, the median price can range significantly from $647,000 ($680,000 in August) in North Scottsdale to $185,000 ($189,000 in August) in the Maryvale area of the city of Phoenix.<separator></separator>Although townhouse/condominium units have retained some popularity with seasonal visitors, investors and people seeking affordable housing, this housing sector has continually fallen from the 1,350 sales in March to 685 sales, while there were 930 sales for a year ago. Much like the single-family market, the median home price decreased from $182,500 in August to $170,000 in September ($173,500 for September 2006).<separator></separator>The median square footage for a single-family home recorded sold in September 2007 was 1,745 square feet, which is larger than the 1,620 square feet for a year ago. The larger size further demonstrates the role of the move-up sector in the local housing market. In the townhouse/condominium sector, the median square footage was 1,075 square feet, which is smaller than the 1,090 square feet reported a year ago.<separator></separator><ul><li>In contrast to September 2006, recorded sales in the city of Phoenix decreased from 1,605 sales to 880 sales, while the median sales price decreased to $211,930 from $223,000 for a year ago. Since Phoenix is a geographically large city, the median prices can range significantly such as $185,000 in the Maryvale area to $300,000 ($314,750 in August) in the Union Hills area. The townhouse/condominium sector decreased from 335 to 240 sales, with the median price decreasing from $152,000 to $150,000. </li><li>The Scottsdale resale home market declined from 340 to 246 recorded sales, with the median sales price decreasing from last year’s $580,000 to $535,000. The median resale home price is $647,000 ($680,000 in August) in North Scottsdale and $283,250 ($305,000 in August) in South Scottsdale. The townhouse/condominium sector in Scottsdale decreased from 170 to 145 sales, while the median sales price increased from $252,250 to $255,000. </li><li>The Mesa resale housing market declined from 555 to 360 sales, with the median price falling from $240,000 to $227,000 ($237,000 in August). The townhouse/condominium sector also decreased from 135 to 90 sales, while the median home price decreased from $155,000 to $149,900. </li><li>In Glendale, the recorded resale number dropped from 400 to 220 sales, and the median sales price decreased from $247,810 to $235,000 ($240,750 in August). The townhouse/condominium sector decreased from 45 to 40 sales, while the median sales price increased from $139,000 to $140,250. </li><li>For the city of Peoria, the resale market declined from 190 to 110 sales, with the median price moving from $265,000 to $251,045 ($257,500 in August). The townhouse/condominium sector decreased from 20 to 15 sales, and the median price went from $169,500 to $161,950. </li><li>In comparison to a year ago, the Sun City resale market declined from 75 to 65 sales, while the median sales price decreased to $176,940 from $206,500. Resale activity in Sun City West increased from 30 to 35 sales, but the median sales price decreased from $215,000 to $201,900. The townhouse/condominium market in Sun City declined from 50 to 25 recorded sales, while the median home price decreased from $132,000 to $118,450. In Sun City West, activity remained at 10 sales and the median sales price decreased from $165,000 to $150,000. </li><li>The resale market in Gilbert decreased from 265 to 220 sales and the median sales price decreased from $318,500 to $276,000 ($300,000 in August). The townhouse/condominium market remained at 10 sales as the median sales price decreased from $215,000 to $211,250. </li><li>For the city of Chandler, the resale market fell from 315 to 205 recorded sales, while the median sales price experienced a small drop from $292,500 a year ago to $292,200 ($282,800 in August). The townhouse/condominium market declined from 40 to 30 sales and the median sales price declined from $176,000 to $163,700. </li><li>The resale market in Tempe decreased from 130 to 90 sales, with the median sales price decreasing from $283,950 to $269,000 ($270,000 in August). The townhouse/condominium sector decreased from 50 to 30 sales and the median sales price decreased from $182,250 to $175,000. </li><li>The highest median sales price was in Paradise Valley at $2,100,000 with a median square foot house of 4,050 square feet. </li><li>In the West Valley, the following communities represent 10 percent of the resale market. <ul><li>Avondale fell from 120 to 70 sales, with the median price moving down from $247,000 to $220,000 ($223,275 in August).</li><li>El Mirage decreased from 75 to 40 sales, and the median home price went from $209,500 to $179,900 ($185,000 in August).</li><li>Goodyear went from 80 to 70 sales, while the median price decreased from $273,000 to $256,500 ($272,000 in August).</li><li>Surprise decreased from 190 sales to 125 sales, with a slight drop in the median price from $239,000 to $237,450 ($232,500 in August).</li></ul></li></ul>