Greater Phoenix Resale Market Continues Strong Sales Trend in May

With 10,430 recorded sales, May followed the traditional patterns of being one of the strongest months of the year. It exceeded the 10,035 sales recorded in March 2005, 8,735 sales for April 2005 and the 9,845 sales for a year ago. This monthly activity continued the record pace for 2005, with a year-to-date total of 46,485 recorded sales, while it stood at 36,555 sales for a year ago. While sales activity continues to mount so does the median sales price as it increased 39 percent from $169,000 in May 2004 to the current $235,000.

In midst of the ever continuing records of activity, there is mounting concern about the affordability of housing, even with lower mortgage rates. The average 30-year mortgage for May 2004 was 5.9 percent, while it was 5.5 percent for May 2005. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home was $850, while it would be $1,135 for May 2005.

“Concerns about the sustainability of the market and affordability for young and minority households continue to linger,” says Jay Q. Butler, director of the Arizona Real Estate Center at Arizona State University.

In remembering the late 1970s and 1980s, there are mounting concerns about the sustainability of the market. The ever higher home prices tend to sustain optimistic growth assumptions about the market. Thus, both investors and owner-occupants seem to buy on future expectations of continued appreciation to provide for profit and/or re-financing opportunities.

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 ever better housing.

Further, there are also concerns that people working in area, especially teachers, policemen and firemen, can not afford to live in the community. This results in ever greater commutes looking for affordable homes, which could become increasingly difficult in the light of ever higher gasoline prices.

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. 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

Since the Greater Phoenix area is so large, the median price can range significantly from $602,740 in North Scottsdale to $114,000 in the Sky Harbor area of the city of Phoenix. For May 2005, 29 percent of all recorded sales were for homes priced from $125,000 to $199,999 and 32 percent for homes priced over $300,000.

With 2,055 sales for May 2005, the resale townhouse/condominium market demonstrated improvement over last year’s 1,940 sales and the 1,670 recorded sales for April 2005. The recorded sales year-to-date is 8,800 units, while it was 7,240 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 $142,000 in April 2005 to $143,500 for May 2005, while it was $114,000 for a year ago.

The median square footage for a single-family home recorded sold in May 2005 was 1,655 square feet, which is smaller than the 1,690 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,140, which is smaller than 1,165 square feet reported a year ago.

• In contrast to May 2004, recorded sales in the city of Phoenix increased from 2,695 sales to 2,910 sales, while the median sales price increased to $185,000 from $135,000. Since Phoenix is a geographically large city, the median prices can range significantly such as $114,000 in the Sky Harbor area to $295,000 in the Union Hills area. The townhouse/condominium sector improved from 460 to 640 sales while the median price increased from $103,750 to $118,500.
• While the Scottsdale resale home market declined from 950 to 865 recorded sales, the median sales price continued its upward movement by increasing from $379,135 in May 2004 to $527,500 in May 2005. The median resale home price is $602,740 in North Scottsdale and $276,500 in South Scottsdale. The townhouse/condominium sector in Scottsdale decreased slightly from 450 to 445 sales, while the median sales price increased from $173,500 to $244,000.
• The Mesa resale housing market grew from 1,090 to 1,205 sales, while the median price increased from $150,000 to $213,000. The townhouse/condominium sector improved from 265 to 290 sales and the median home price increased from $99,900 to $115,000.
• Glendale improved from 760 to 800 sales and the median sales price increased from $155,000 to $215,000. The townhouse/condominium sector grew from 75 to 95 sales, while the median sales price increased from $82,500 to $94,750.
• In comparison to a year ago, the Sun City resale market decreased from 225 to 200 sales, with the median sales price increasing to $188,000 from $135,750. Resale activity in Sun City West remained at 110 recorded sales, but the median sales price increased from $160,000 to $222,000. The townhouse/condominium market in Sun City decreased from 135 to 125 recorded sales, while the median home price increased from $86,500 to $120,000. In Sun City West, activity decreased from 60 to 35 sales and the median sales price increased from $113,450 to $165,000.
• The resale market in Gilbert was stable at 600 sales, but the median sales price increased from $190,310 to $285,000. The townhouse/condominium market fell from 40 to 20 sales as the median sales price increased from $123,950 to $160,000.
• For the City of Chandler, the resale market grew slightly from 705 to 710 recorded sales, while the median sales price increased from $179,000 to $252,105. The townhouse/condominium market increased from 75 to 80 sales and the median sales price increased from $114,900 to $135,250.
• The resale market in Tempe remained at 275 sales, with the median sales price increasing to $236,950 from $175,000. The townhouse/condominium sector decreased from 150 to 140 sales and the median sales price increased from $113,000 to $150,000.
• The highest median sales price was in Paradise Valley at $1,400,000, with the median square foot house at 3,665 square feet.

• In the West Valley, the following communities represent 11 percent of the resale market, while it stood at 9 percent for a year ago.

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  • Avondale grew from 175 to 280 sales, with the median price moving from $158,950 to $226,000.
  • El Mirage improved from 105 sales to 165 sales, with the median price moving from $127,500 to $185,700.
  • Goodyear moved from 185 to 210 sales, with the median price increasing from $183,900 to $245,000.
  • Surprise increased from 380 sales to 465 sales, with the median price rising from $158,000 to $231,000.