Greater Phoenix Resale Home Market Experiences Up Tick in February

March 21, 2006

MESA, AZ —With 5,455 recorded sales in February 2006, the greater Phoenix resale market has rebounded slightly from the 5,260 sales recorded in January 2006. However, it is well below the 7,935 sales recorded a year ago and the 10,700 sales of August 2005. Even with the slight up tick in activity, the overall trend back to normalcy appears to be continuing.

The 2006 year-to-date is 10,715, in contrast to 17,290 for 2005, but comparable to the 10,680 sales for start of 2004.

"The impact of the holidays on recordings and the desire of people to look for a new home make the early months of year a poor barometer for the coming year," said Jay Q. Butler, director of the Arizona Real Estate Center at Arizona State University's Polytechnic campus. "The basic direction of the local real 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. Since the record of $263,000 was set in September, the growth rate had been disappearing, with the median price being $257,000 in January. A slight re-emergence of price growth occurred in February at $265,000, while it was $200,000 for a year ago.

"This is not too unexpected," said Butler. "As housing markets slow, the move-up market tends to dominate activity with higher-priced homes. For example, in January 2006, 23 percent of the sales were in $300,000 to $499,999, while it was 25 percent in February."

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 February 2005 was 5.3 percent, while it was 5.8 percent for February 2006. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home increased from $945 to $1,325.

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 $657,800 in North Scottsdale to $130,000 in the Sky Harbor area of the city of Phoenix. For February 2006, 19 percent of all recorded sales were for homes priced from $125,000 to $199,999, 40 percent for $200,000 to $299,999 and 37 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 a slight increase from 1,225 sales for January to 1,260 sales for February 2006, down from last year's 1,520 sales. However, the median home price moved strongly to a record $175,000.

The median square footage for a single-family home recorded sold in February 2006 was 1,620 square feet, which is smaller than the 1,650 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,135 square feet, which is larger than 1,130 square feet reported a year ago.

In contrast to February 2005, recorded sales in the city of Phoenix decreased from 2,235 sales to 1,680 sales, while the median sales price increased to $213,750 from $160,000. Since Phoenix is a geographically large city, the median prices can range significantly, such as $130,000 in the Sky Harbor area to $315,000 in the Union Hills area. The townhouse/condominium sector increased from 425 to 435 sales while the median price increased from $113,900 to $158,500.
While the Scottsdale resale home market declined from 635 to 400 recorded sales, the median sales price continued its upward movement by increasing from $469,400 a year ago to $575,000, while it was $600,000 in January 2006. In February 2006, the median resale home price was $657,800 ($675,000 in January) in North Scottsdale and $315,500 ($317,500 in January) in South Scottsdale. The townhouse/condominium sector in Scottsdale also decreased from 315 to 235 sales, but the median sales price increased from $206,000 to $285,000.
The Mesa resale housing market declined from 945 to 655 sales, while the median price increased from $180,000 to $245,000 ($240,000 in January). The townhouse/condominium sector also fell from 250 to 190 sales, while the median home price increased from $107,500 to $155,000.
Glendale decreased from 545 to 435 sales, but the median sales price increased from $175,000 a year ago to $250,000 ($238,500 in January).The townhouse/condominium sector fell from 75 to 65 sales, while the median sales price increased from $81,500 to $140,000.
In comparison to a year ago, the Sun City resale market fell from 150 to 100 sales, the median sales price increased to $216,000 from $159,900. Resale activity in Sun City West also fell from 70 to 60 sales, but the median sales price increased from $189,900 to $243,500. The townhouse/condominium market in Sun City declined from 100 to 60 recorded sales, while the median home price increased from $110,000 to $146,450. In Sun City West, activity fell slightly from 25 to 15 sales, but the median sales price increased from $130,000 to $180,000.
The resale market in Gilbert decreased from 495 to 290 sales, but the median sales price increased from $251,000 to $341,000 ($337,250 in January). The townhouse/condominium market remained at 20 sales as the median sales price increased from $142,750 to $213,000.
For the city of Chandler, the resale market slowed from 560 to 400 recorded sales, while the median sales price increased from $230,000 to $299,900 ($305,000 in January). The townhouse/condominium market remained at 65 sales and the median sales price increased from $121,750 to $183,600.
The resale market in Tempe decreased from 165 to 120 sales, with the median sales price increasing to $300,000 ($269,900 in January) from $198,900 a year ago. The townhouse/condominium sector remained at 90 sales and the median sales price increased from $122,000 to $185,000.
The highest median sales price was in Paradise Valley at $1,712,500 with a median square foot of 3,690.
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 170 to 110 sales with the median price moving from $196,000 to $261,000 ($258,000 in January).
- El Mirage decreased from 120 to 60 sales, while the median home price went from $165,300 to $221,000 ($224,000 in January).
- Goodyear declined from 150 to 80 sales, while the median price increased from $208,400 to $289,000 ($275,000 in January).
- Surprise decreased from 345 sales to 200 sales, with a median price increase from $198,000 to $260,750 ($249,000 in January).