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Greater Phoenix resale market experiences slight increase, lower appreciation for October


November 15, 2007

MESA, Ariz. — With 3,610 recorded sales in October 2007, the local resale housing market showed some improvement over the 3,050 sales recorded in September, but well below last year’s 4,985 transactions. Even with some improvement, the fourth quarter of the year is traditionally one of the slowest. The month of October brought the year-to-date total to 44,410 sales, which is well below the 57,375 for 2006 year to date and 97,170 sales for 2005 year to date.

Even in an uninspiring market, there are potential buyers that cannot get the needed financing due to tighter mortgage underwriting guidelines. This could be especially true in the move-up market.

“The combination of large inventories and low interest rates have enabled people to purchase more expensive homes, which is one reason the county median price has remained fairly stable,” said Jay Butler, director of Realty Studies in the Morrison School of Management and Agribusiness at Arizona State University’s Polytechnic campus. “However, continuing concerns in the nonconforming mortgage market, like mortgages above $417,000, have begun to adversely impact the move-up market.”

Last year, 37 percent of the resale homes sold for more than $300,000, while it was 34 percent for October 2007. Because financing is more available in the conforming mortgage market, homes selling for under $200,000 have increased from last year’s 16 percent to a current 27 percent of the local resale housing market.

Foreclosures and new homes are providing a competitive alternative to the resale home in many areas of the market. New home builders have been aggressively pursuing buyers through incentives such as specially priced up-grades, free pools and gift cards. Thus, the 2007 resale housing market continues to show signs of increasing weaknesses that are driving below the expectations of even a few months ago.

Much like the increasing sales activity of the last few years, the rapid improvement in prices has disappeared. The median home price in October was $242,000 in comparison to $250,000 for September and last year’s $257,000.

“This is the lowest monthly median home price since $235,000 in May 2005,” said Butler. “The most evident impact of lower prices is improved affordability. Although mortgage interest rates increased slightly from last year’s 6.0 percent to 6.1 percent, the lower median price allowed the monthly payment to decrease from last year’s $1,310 to $1,245.”

Changes in median prices can vary tremendously throughout the Valley. For the western suburbs the median price has fallen from $240,000 in September 2006 to $211,500. On the other hand, homes in the North Mesa area have gone from last year’s $227,500 to $225,000. While some areas have declining prices, other areas are increasing or remaining fairly stable, especially the mature neighborhoods that are close to freeways, retail and schools. Since the greater Phoenix area is so large, the median price can range significantly from $644,500 ($647,000 in September) in North Scottsdale to $175,000 ($185,000 in September) in the Maryvale area of the city of Phoenix.

Much like the single-family market the townhouse/condominium market also showed some improvement in October with 710 recorded sales. This is better than the 685 sales of September, but below the 915 sales of a year ago. Townhouse-condominiums tend to be popular with seasonal visitors, investors and people seeking affordable housing. Unlike the single-family market, the median home price remained stable at $170,000 and comparable to last year’s $175,000. However, the median price has fallen greatly from the record $184,990 set in May 2007. Some of the price decline can be attributed to slowing of the higher priced condo conversion projects.

The median square footage for a single-family home recorded sold in October 2007 was 1,745 square feet, which is larger then the 1,635 square feet for a year ago. The larger size further demonstrates the role of the move-up sector in the local housing market. In the townhouse/condominium sector, the median square footage was 1,070 square feet, which is smaller than the 1,120 square feet reported a year ago.

  • In contrast to October 2006, recorded sales in the city of Phoenix decreased from 1,545 sales to 1,005 sales, while the median sales price decreased to $203,430 from $222,000 for a year ago. Since Phoenix is a geographically large city, the median prices can range significantly such as $175,000 ($185,000 in September) in the Maryvale area to $307,450 ($300,000 in September) in the Union Hills area. The townhouse/condominium sector decreased from 340 to 255 sales while the median price increased from $152,000 to $155,170.
  • While the Scottsdale resale home market declined from 420 to 280 recorded sales, the median sales price increased from last year’s $548,500 to $550,000. The median resale home price is $644,500 ($647,000 in September) in North Scottsdale and $277,200 ($283,250 in September) in South Scottsdale. The townhouse/condominium sector in Scottsdale decreased from 190 to 160 sales, while the median sales price decreased from $253,350 to $225,900.
  • The Mesa resale housing market declined from 555 to 385 sales, while the median price fell from $235,000 to $232,000 ($227,000 in September). The townhouse/condominium sector also fell from 100 to 90 sales, while the median home price decreased from $153,000 to $140,950.
  • Glendale decreased from 415 to 270 sales and the median sales price decreased from $248,000 to $222,500 ($235,000 in September). The townhouse/condominium sector decreased from 55 to 40 sales, while the median sales price decreased from $141,000 to $140,000.
  • For the city of Peoria, the resale market declined from 200 to 165 sales, and the median price moved from $257,500 to $248,750 ($251,045 in September). The townhouse/condominium sector decreased from 30 to 15 sales, while the median price went from $162,450 to $189,950.
  • In comparison to a year ago, the Sun City resale market declined from 80 to 65 sales, while the median sales price decreased to $183,250 from $209,950. Resale activity in Sun City West decreased from at 35 to 30 sales, but the median sales price decreased from $234,450 to $210,000. The townhouse/condominium market in Sun City was stable at 40 recorded sales, while the median home price decreased from $145,000 to $116,000. In Sun City West, activity remained at 10 sales and the median sales price decreased from $160,950 to $152,500.
  • The resale market in Gilbert decreased from 270 to 230 sales, and the median sales price decreased from $328,000 to $275,000 ($276,000 in September). The townhouse/condominium market remained at 10 sales as the median sales price decreased from $234,900 to $175,000.
  • For the city of Chandler, the resale market fell from 345 to 250 recorded sales, while the median sales price went from $298,000 to $279,000 ($292,200 in September). The townhouse/condominium market declined from 30 to 25 sales and the median sales price declined from $189,900 to $168,000.
  • The resale market in Tempe decreased from 90 to 85 sales, with the median sales price decreased from $296,500 to $261,200 ($269,000 in September). The townhouse/condominium sector decreased from 50 to 25 sales, while the median sales price increased from $189,950 to $190,000.
  • The highest median sales price was in Paradise Valley at $1,695,000 with a median square foot house of 3,965 square feet.
  • In the West Valley, the following communities represent 11 percent of the resale market.
    • Avondale fell from 140 to 90 sales, with the median price moving from $247,000 to $214,700 ($220,000 in September).
    • El Mirage decreased from 70 to 50 sales, while the median home price went from $205,000 to $180,245 ($179,900 in September).
    • Goodyear went from 80 to 85 sales, while the median price decreased from $275,000 to $247,000 ($256,500 in September).
    • Surprise decreased from 195 sales to 170, with the median price decreasing from $237,000 to $229,080 ($237,450 in September).