Greater Phoenix Resale Home Market Slows, But Still Hot

May 10, 2005

Following a fairly traditional pattern, the resale home market declined to 8,735 recordings in April 2005 from 10,035 sales for March 2005, but well ahead of last year' s 7,250 sales. This monthly activity continued the record pace for 2005, with a year-to-date total of 36,060 recorded sales. For a year ago at this time the total stood at 26,710 sales.<separator></separator>While 2004 started out strong, it really did not pick up steam until after March. As sales activity continues to mount, so does the median sales price as it increased 35 percent from $164,000 in April 2004 to the current $221,000.<separator></separator>In the midst of ever continuing records of activity, there is mounting concern about the affordability of housing. The average 30-year mortgage for April 2004 was 5.6 percent, which is the same for April 2005. However, based on an 85 percent loan-to-value, the monthly mortgage payment for a median price home was $800, while it was $1,080 for April 2005.<separator></separator>In remembering the late 1970s and 1980s, there are mounting concerns about whether the market can be sustained.<separator></separator>"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 of continued appreciation, providing for profit and/or re-financing opportunities," says Jay Butler, director of the Arizona Real Estate Center located at Arizona State University's Polytechnic campus.<separator></separator>Even with stable interest rates, the higher home prices are seriously impacting affordability, especially for first-time home buyers looking to enter the housing game and to start moving up to ever better housing. Further, there are also concerns that people working in the area, especially teachers, policemen and firemen, cannot afford to live in the communities where they work. This results in greater commutes looking for affordable homes, which could become increasingly difficult in the light of higher gasoline prices.<separator></separator>The increasing number of rental properties has resulted in extreme competition based on lower rents and even concessions. Rental difficulties could lead to fewer future buyers and more homes on the market.<separator></separator>For owner-occupants, higher interest rates combined with stable income and higher home prices will adversely impact the affordability of housing leading to a potential slower level of activity. Further, people, with low interest rate mortgages, have little incentive to move to provide some additional stimulus to the market.<separator></separator>Since the Greater Phoenix area is so large, the median price can range significantly from $552,450 in North Scottsdale to $110,000 in the Sky Harbor area of the city of Phoenix. For April 2005, 33 percent of all recorded sales were for homes priced from $125,000 to $199,999 and 29 percent for homes priced over $300,000.<separator></separator>With 1,670 sales for April 2005, the resale townhouse/condominium market demonstrated improvement over last year's 1,535 sales, but was down from the 1,880 sales recorded in March 2005. The 2005 year-to-date is 6,745 units, while it was 5,300 for 2004 YTD. 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 $130,000 in March 2005 to $142,000 for April 2005, while it was $112,500 a year ago.<separator></separator>The median square footage for a single-family home recorded sold in April 2005 was 1,650 square feet, which is slightly smaller than the 1,680 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,160, which is smaller than the 1,185 square feet reported a year ago.<separator></separator>In contrast to April 2004, recorded sales in the city of Phoenix increased from 1,965 sales to 2,490 sales, while the median sales price increased to $174,000 from $131,250. Since Phoenix is a geographically large city, the median prices can range significantly such as $110,000 in the Sky Harbor area to $300,000 in the Union Hills area. The townhouse/condominium sector improved from 360 to 470 sales while the median price increased from $102,500 to $123,250.<separator></separator>While the Scottsdale resale home market declined from 725 to 695 recorded sales, the median sales price continued its upward movement by increasing from $365,000 in April 2004 to $475,000 in April 2005. The median resale home price is $552,450 in North Scottsdale and $257,000 in South Scottsdale. The townhouse/condominium sector in Scottsdale improved from 340 to 350 sales, while the median sales price increased from $172,000 to $239,950.<separator></separator>The Mesa resale housing market grew strongly from 805 to 1,070 sales, while the median price increased from $150,000 to $195,250. The townhouse/condominium sector improved from 230 to 280 sales and the median home price increased from $99,000 to $117,500.<separator></separator>Glendale improved from 530 to 580 sales and the median sales price increased from $151,000 to $200,000.The townhouse/condominium sector grew from 50 to 60 sales, while the median sales price increased from $83,000 to $106,000.<separator></separator>In comparison to a year ago, the Sun City resale market decreased from 210 to 160 sales, with the median sales price increasing to $178,500 from $132,400. Resale activity in Sun City West declined from 115 to 90 recorded sales, but the median sales price increased from $160,000 to $208,700. The townhouse/condominium market in Sun City remained at 115 recorded sales, while the median home price increased from $82,000 to $116,000. In Sun City West, activity decreased from 50 to 40 sales and the median sales price increased from $121,000 to $143,000.<separator></separator>The resale market in Gilbert was better as activity moved from 405 to 475 sales and the median sales price increased from $180,890 to $270,000. The townhouse/condominium market expanded from 20 to 35 sales as the median sales price increased from $120,750 to $155,000.<separator></separator>For the City of Chandler, the resale market expanded from 450 to 595 recorded sales, while the median sales price increased from $168,130 to $253,335. The townhouse/condominium market decreased from 75 to 70 sales, but the median sales price increased from $114,280 to $140,500.<separator></separator>The resale market in Tempe improved from 185 to 200 sales, with the median sales price increasing to $222,000 from $174,000. The townhouse/condominium sector decreased from 90 to 75 sales and the median sales price increased from $119,900 to $146,900.<separator></separator>The highest median sales price was in Paradise Valley at $1,137,500 with a median square foot house of 3,610 square feet.<separator></separator>In the West Valley, the following communities represent 11 percent of the resale market, while it stood at nine percent for a year ago.<separator></separator><ul><li>Avondale grew from 140 to 220 sales with the median price moving from $153,750 to $217,450.</li><li>El Mirage improved from 80 sales ($121,450) to 160 sales ($174,900).</li><li>Goodyear moved from 140 to 200 sales, while the median price increased from $174,750 to $230,500.</li><li>Surprise increased from 270 sales ($154,400) to 395 sales ($220,000).</li></ul>