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Greater Phoenix Resale Market Continues Strong Record


August 16, 2005

MESA, Ariz. — The local resale home market slipped slightly in July 2005 with 10,200 recorded sales, while it was 11,545 sales for June 2005. It was, however, well ahead of last year's 8,525 sales. So far in 2005, there have been 68,235 sales, in contrast to the 2004 year-to-date of 56,745 sales.

Even if the sales activity slowed, the median home price continued at a record pace moving from $249,900 in June 2005 to $255,000. This was a 45 percent increase over last year's $176,000. This pace adds greater concern about the affordability of housing in the greater Phoenix area.

The average 30-year mortgage for July 2004 was 5.7 percent, while it was 5.4 percent for July 2005. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home was $870, while it would be $1,220 for July 2005.

The ever higher home prices tend to sustain optimistic growth assumptions about the market.

"Both investors and owner-occupants seem to be buying on future expectations about continued appreciation to provide for profit and/or re-financing opportunities," said Jay Butler, director of the Arizona Real Estate Center at Arizona State University's Polytechnic campus.

Even with lower interest rates, the higher home prices are seriously impacting affordability, especially for young and minority households working to purchase their first home to enter the housing game and to start moving up to better housing. Further, there is increasing examination of workforce housing as to whether working for a community such as teachers, policemen or firemen can afford to live in the community. In searching for affordability, people are moving to the outer fringes of area where commutes are becoming increasingly expensive in light of higher gasoline prices and longer commute times.

With declining affordability, there has been an ever increasing reliance on creative mortgage financing to allow people to buy, both owner-occupants and investors. 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," said Butler.

Since the greater Phoenix area is so large, the median price can range significantly from $667,450 in North Scottsdale to $128,500 in the Sky Harbor area of the city of Phoenix. For July 2005, 22 percent of all recorded sales were for homes priced from $125,000 to $199,999, 38 percent for $200,000 to $299,999 and 35 percent for homes priced over $300,000.

With 1,905 sales for July 2005, the resale townhouse/condominium market also slowed slightly from 2,125 sales in June 2005, while it stood at 1,495 for July 2004. The 2005 year-to-date is 12,830 units, while it was 10,770 for 2004 year-to- date. 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 last year's $111,500 to the current $156,125.

The median square footage for a single-family home recorded sold in July 2005 was 1,655 square feet, which is smaller than the 1,725 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,120 square feet, which is smaller than the 1,140 square feet reported a year ago.

In contrast to July 2004, recorded sales in the city of Phoenix increased from 2,205 sales to 2,780 sales, while the median sales price increased to $197,000 from $144,900. Since Phoenix is a geographically large city, the median prices can range significantly such as $128,500 in the Sky Harbor area to $325,000 in the Union Hills area. The townhouse/condominium sector improved from 435 to 575 sales while the median price increased from $96,900 to $130,000.

While the Scottsdale resale home market declined from 820 to 745 recorded sales, the median sales price continued its upward movement by increasing from $389,000 to $560,000. The median resale home price is $667,450 in North Scottsdale and $291,500 in South Scottsdale. The townhouse/condominium sector in Scottsdale improved from 355 to 395 sales and the median sales price increased from $163,840 to $246,250.

The Mesa resale housing market grew from 1,060 to 1,225 sales, while the median price increased from $159,220 to $230,000. The townhouse/condominium sector improved from 210 to 365 sales and the median home price increased from $98,000 to $128,000.

Glendale improved from 635 to 750 sales and the median sales price increased from $162,000 to $225,000.The townhouse/condominium sector grew from 50 to 80 sales, while the median sales price increased from $93,000 to $118,500.

In comparison to a year ago, the Sun City resale market remained at 140 sales, with the median sales price increasing to $190,000 from $135,000. Resale activity in Sun City West also declined from 75 to 70 recorded sales, but the median sales price increased from $165,000 to $240,000.The townhouse/condominium market in Sun City decreased from 75 to 70 recorded sales, while the median home price increased from $83,500 to $135,000. In Sun City West, activity increased from 20 to 30 sales and the median sales price increased from $110,000 to $164,000.

The resale market in Gilbert increased from 530 to 650 sales and the median sales price increased from $212,000 to $315,000. The townhouse/condominium market grew from 20 to 30 sales as the median sales price increased from $130,000 to $190,000.

For the city of Chandler, the resale market grew from 680 to 745 recorded sales, while the median sales price increased from $184,895 to $282,000. The townhouse/condominium market improved from 70 to 80 sales and the median sales price increased from $109,900 to $159,950.

The resale market in Tempe improved from 230 to 275 sales, with the median sales price increasing to $270,000 from $186,900. The townhouse/condominium sector increased from 110 to 130 sales and the median sales price increased from $119,700 to $171,600.

The highest median sales price was in Paradise Valley at $1,400,000 with a median square foot house of 3,890 square feet.

In the West Valley, the following communities represent 11 percent of the resale market, while it stood at 8 percent for a year ago.

  • Avondale grew from 190 to 275 sales with the median price moving from $163,125 to $250,000.
  • El Mirage improved from 110 sales ($134,000) to 185 sales ($216,150).
  • Goodyear moved from 170 to 215 sales, while the median price increased from $172,330 to $274,950.
  • Surprise increased from 300 sales ($165,000) to 430 sales ($250,000).