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Greater Phoenix resale home market finishes 2006 with a fizzle


January 10, 2007

MESA, Ariz. — With 4,620 sales recorded in December, the 2006 Greater Phoenix resale home market continued to slow, with 5,040 sales in November 2006, and 6,480 sales for a year ago. This is the lowest level of activity for 2006 and the lowest for December since 4,785 sales were recorded in 2000. For 2006, a total to 67,035 sales were recorded, in contrast to 110,835 sales for 2005 and 102,115 recordings for 2004. While the market slowed appreciable, 2006 is the fourth best resale market year on record, falling between 2002 (62,625 sales) and 2003 (73,785 sales) numbers.

Even in a slowing year, the local resale housing market should show historical improvement in a rapidly growing area like Greater Phoenix, according to Jay Q. Butler, director of Realty Studies at Arizona State University’s Polytechnic campus.

“The local resale housing market, since 1982, has been fairly stable, representing 7 percent of the single-family inventory, while the 2005 indicator stood at 11 percent,” said Butler. “The 2006 housing market stands at 6 percent of inventory which is comparable to the housing markets of the mid-1990s.”

While sales activity declined 40 percent, the median home price increased 8.4 percent from $240,500 in 2005 to $260,600. While this is another record year, the median price has been steadily declining during the year from $267,000 in June to $255,900 in December, which is the lowest median price since $255,000 was reported in July 2005.

For 2006, 16 percent of all recorded sales were for homes priced from $125,000 to $199,999, 43 percent for $200,000 to $299,999 and 38 percent for homes priced more than $300,000.  In 2005, 28 percent of all recorded sales were for homes priced from $125,000 to $199,999, 35 percent for $200,000 to $299,999 and 33 percent for homes priced more than $300,000. The Greater Phoenix area is large, so the median price can range significantly from $682,000 ($600,000 in 2005) in North Scottsdale to $149,900 ($117,500 in 2005) in the Sky Harbor area of the city of Phoenix.

A fundamental component of the economic development of the area has been the relative affordability of housing, especially when compared to California and the national housing market. While the local market is still well below most of the California market, it is now well above the national median sales price of $225,000.

Although low mortgage interest rates have been very important in sustaining the market, the rapid increase in the median home price has greatly increased the monthly payment. Based on 85 percent loan-to-value, the mortgage payment would have been $1,160 in 2005 (5.5 percent interest rate) to $1,330 for 2006 (6 percent interest rate). The 2006 resale affordability index is 74; it was 84 for 2005. While improved affordability is important for the continued economic development of the area, declining home prices could seriously impact many households, especially those who have used the increasing values to finance a desired lifestyle.

The rapid growth of sales activity and prices of the last few years has been due largely to the ever-increasing involvement of investors in the market. Thus, the slowdown in the investor market can be a relevant reason for the overall market slowdown and the increase in trouble properties. Many investors have found it increasingly difficult to rent and are trying to sell their homes before they lose them to foreclosure or to sell them to lock in any appreciation.

Another source of trouble properties are those households, in anticipation of continued appreciation, that bought more home than they could afford and probably used non-traditional financing to acquire it. Thus, confronting financial issues, these households are trying to sell in order to obtain some appreciation and/or to avoid foreclosure.

“Thus, many of the market issues of 2006 and potentially 2007 can be attributed to individuals, trying to secure their futures, who got emotionally involved through believing in constant success and appreciation,” said Butler.

The townhouse/condominium housing sector also slowed significantly to 13,995 sales, from 21,290 sales of 2005. For 2006, market activity declined from 1,470 sales in May to 880 sales for December, which was the lowest monthly activity since 870 sales were recorded in February 2003. In the townhouse/condominium sector, the annual median sales price increased 16 percent from $150,000 to $174,000. For 2006, the median price moved from $165,000 in January to $175,000 in December, with the record being $179,000 in July.

The median square footage for a single-family home sold in 2005 was 1,640 square feet, while it was reported as 1,655 square feet in 2006. In the townhouse/condominium sector, the median square footage increased slightly from 1,120 square feet to 1,125 square feet.

  • In contrast to 2005, recorded sales in the city of Phoenix fell from 31,465 to 20,600 sales, while the median sales price increased from $189,500 to $220,000. The median price ranged from $325,000 in the Union Hills Area ($309,000 in 2005) to $209,000 in the Metrocenter area ($165,000 in 2005) to $149,500 in the Sky Harbor area ($117,500 in 2005). In the townhouse/condominium sector, sales activity declined from 6,520 to 4,605 sales, while the median sales price moved from $126,000 to $149,000.
  • In contrast to 2005, recorded sales in the city of Phoenix fell from 31,465 to 20,600 sales, while the median sales price increased from $189,500 to $220,000. The median price ranged from $325,000 in the Union Hills Area ($309,000 in 2005) to $209,000 in the Metrocenter area ($165,000 in 2005) to $149,500 in the Sky Harbor area ($117,500 in 2005). In the townhouse/condominium sector, sales activity declined from 6,520 to 4,605 sales, while the median sales price moved from $126,000 to $149,000.
  • Scottsdale slowed from 8,515 sales to 5,150 sales.  The median sales price, however, continued its upward movement from $525,000 to $595,000. The median sales price in North Scottsdale improved from $600,000 to $682,000, while it moved from $280,000 to $320,000 in South Scottsdale. The townhouse/condominium sector in Scottsdale declined from 4,430 recorded sales to 2,900 sales; with the median sales price increasing from last year’s $242,900 to $264,005.
  • The resale market in the city of Mesa also decreased from 13,165 sales in 2005 to 7,600 sales. The median price increased from $220,000 to $243,500. The townhouse/condominium sector also declined from 3,425 sales to 1,995, while the median price increased from $128,700 to $156,000.
  • Sales activity in the Glendale resale home market decreased from 8,390 sales in 2005 to 5,310 sales, while the median sales price increased from $221,900 to $249,900. The townhouse/condominium sector also decreased from 1,055 sales to 760 sales, but the median sales price increased from $107,000 to $142,000.
  • For the city of Peoria, the resale market fell from 5,055 sales to 2,930 sales, while the median price moved from $250,000 to $270,000. The townhouse/condominium sector slowed from 520 to 380 sales and the median price went from $139,900 to $166,000.
  • In comparison to 2005, the Sun City resale market decreased from 1,900 sales to 1,160 sales, while the median sales price increased from $185,000 to $210,000. In Sun City West, sales activity also declined from 940 sales to 545 sales, while the median sales price increased from $224,000 to $240,000. The townhouse/condominium market in Sun City slowed from 1,130 to 685 sales, but the median sales price increased from $124,900 to $140,000. In Sun City West, sales activity moved from 315 sales to 175 sales, with the median sales price increasing from $160,000 to $175,000.
  • The resale market in Gilbert moved from 6,715 to 3,730 sales. The median sales price improved from $292,000 to $327,000. In the townhouse/condominium market, recording activity fell from 310 to 165 sales, but the median price increased from $182,500 to $211,000.
  • For the city of Chandler, the resale market decreased from 7,800 in 2005 to 4,625 sales, while the median sales price increased from $271,650 to $297,900. The townhouse/condominium sector fell from 950 sales to 510 sales while the median sales price moved from $155,000 to $180,000.
  • The resale market in Tempe declined from 2,630 sales in 2005 to 1,785, while the median sales price moved from $250,000 to $285,000. The townhouse/condominium sector also moved down from 1,360 sales to 885, with the median sales price going from $162,000 to $190,000.
  • The highest median sales price was in Paradise Valley at $1,650,000 with a median square foot house of 3,545 square feet.
  • Although mostly known as new home markets, the West Valley resale housing market represented about 9 percent of the local resale housing market in 2006.
    • Avondale – 2,785 ($239,900 in 2005) to 1,555 ($255,000) sales,
    • El Mirage – 1,870 ($199,000 in 2005) to 955 ($215,000) sales,
    • Goodyear – 2,225 ($260,000 in 2005) to 1,075 ($282,000) sales,
    • Surprise – 4,905 ($240,195 in 2005) to 2,515 ($250,000) sales.

December activity was as follows:


City

   Single-family

Townhouse/condo

 

   Single-family

 Townhouse/condo

2006

2006

2006

2006

 

2005

2005

2005

2005

Sales

Median

Sales

Median

 

Sales

Median

Sales

Median

Activity

Price

Activity

Price

 

Activity

Price

Activity

Price

Phoenix

1430 222,400 280 149,900

 

2,080 205,000 465 137,025

Scottsdale

355 567,500 215 245,000

 

465 570,000 245 251,000

Mesa

505 241,000 110 157,000

 

785 249,600 225 152,800

Glendale

345 244,900 50 149,900

 

555 246,750 80 125,000

Peoria

175 258,450 30 178,500

 

275 255,000 35 160,000

Gilbert

300 313,305 20 197,450

 

325 325,000 15 214,900

Chandler

335 282,900 40 171,200

 

450 295,000 75 185,000

Sun City

85 215,000 40 134,500

 

85 205,000 75 139,900

Sun City West

30 209,500

 

 

 

60 250,000 20 190,000

Tempe

135 272,750 55 184,950

 

155 289,000 110 185,000

Avondale

95 245,000

 

 

 

180 257,500

 

 

El Mirage

70 209,075

 

 

 

105 225,000

 

 

Goodyear

75 257,000

 

 

 

110 313,000

 

 

Surprise

170 232,500

 

 

 

255

257,250