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Greater Phoenix Resale Market Finishes 2nd Quarter Strong


July 13, 2005

The torrid pace for the local resale home market continued through June 2005 with 11,545 recorded sales, which is slightly below the record 11,665 sales set in June 2004. With strong monthly activity, second quarter 2005 set a record at 30,705 recorded sales, which broke the record set in second quarter 2004 at 28,760 sales. There were 27,330 sales in first quarter 2005, which brings the year-to-date total to 58,035 sales, while the year to date for 2004 was 48,220 sales.

As sales activity continues to mount, so does the median sales price as it increased 43 percent from $175,000 in June 2004 to the current $249,900. For the second quarter 2005, the median sales price was $235,500, while it was $203,000 in the first quarter and $170,000 for a year ago.

In midst of the continuing records of activity, there is mounting concern about the affordability of housing. The average 30-year mortgage for June 2004 was 5.9 percent, while it was 5.3 percent for June 2005. Based on an 85 percent loan-to- value, the monthly mortgage payment for the median price home was $880, while it would be $1,180 for June 2005. The 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 about 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 better housing. For second quarter 2005, the resale affordability index was 86, while it stood at 112 for a year ago. An index value of 100 means that the median income household can afford the current median resale price at the stated effective interest rate.

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 light of higher gasoline prices. "With declining affordability, there has been an increased reliance on creative mortgage financing to allow people, both owner-occupants and investors, to buy," said Jay Q. Butler, director of the Arizona Real Estate Center at Arizona State University's Polytechnic campus.

"The available instruments run the gamut from low interest rate adjustable mortgages to interest only mortgages. 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 $600,475 in North Scottsdale to $113,500 in the Sky Harbor area of the city of Phoenix. For second quarter 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 2,125 sales for June 2005, the resale townhouse/condominium market for second quarter 2005 stood at 5,850 recorded sales, which is more than last year's 5,515 sales and the 5,075 recorded sales for first quarter 2005. The 2005 year to date is 10,925 units, while it was 9,280 for 2004 year to date. This housing form has become popular with investors and households looking for an affordable entry into the housing market. The popularity has driven the median home price from last year's $127,200 to $145,000 for second quarter 2005.

The median square footage for a single-family home recorded sold in the second quarter 2005 was 1,655 square feet, which is smaller than the 1,700 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,135 square feet, which is smaller than 1,160 square feet reported a year ago.

In contrast to second quarter 2004, recorded sales in the city of Phoenix increased from 7,430 sales to 8,380 sales, while the median sales price increased to $182,500 from $135,000. Since Phoenix is a geographically large city, the median prices can range significantly such as $113,500 in the Sky Harbor area to $312,000 in the Union Hills area. The townhouse/condominium sector improved from 1,365 to 1,745 sales, while the median price increased from $99,900 to $120,250.

While the Scottsdale resale home market declined from 2,880 to 2,480 recorded sales, the median sales price continued its upward movement by increasing from $377,330 to $521,250. The median resale home price is $600,475 in North Scottsdale and $273,000 in South Scottsdale. The townhouse/condominium sector in Scottsdale remained stable at 1,260 sales, while the median sales price increased from $169,975 to $249,000.

The Mesa resale housing market grew from 3,240 in the second quarter 2004 to 3,615 sales in second quarter 2005, while the median price increased from $153,450 to $210,000. The townhouse/condominium sector improved from 800 to 925 sales and the median home price increased from $98,300 to $118,710.

Glendale improved from 2,220 to 2,250 sales and the median sales price increased from $155,000 to $215,000.The townhouse/condominium sector grew from 215 to 265 sales, while the median sales price increased from $82,500 to $99,500.

In comparison to second quarter 2004, the Sun City resale market decreased from 650 to 560 sales, with the median sales price increasing to $185,000 from $135,000. Resale activity in Sun City West also declined from 350 to 290 recorded sales, but the median sales price increased from $162,000 to $220,000.The townhouse/condo- minium market in Sun City decreased from 350 to 320 recorded sales, while the median home price increased from $85,000 to $121,750. In Sun City West, activity decreased from 140 to 100 sales and the median sales price increased from $118,000 to $158,000.

The resale market in Gilbert increased from 1,770 to 1,875 sales, and the median sales price increased from $190,000 to $283,500. The townhouse/condominium market stayed at 80 sales as the median sales price increased from $123,000 to $165,000.

For the city of Chandler, the resale market grew slightly from 2,020 to 2,070 recorded sales, while the median sales price increased from $179,900 to $265,000. The townhouse/condominium market remained at 240 sales, but the median sales price increased from $112,500 to $142,500.

The resale market in Tempe declined from 780 to 745 sales, with the median sales price increasing to $237,000 from $179,900. The townhouse/condominium sector decreased from 380 to 350 sales and the median sales price increased from $116,000 to $151,500.

The highest median sales price was in Paradise Valley at $1,292,500 with a median square foot house of 3,600 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 540 to 770 sales, with the median price moving from $157,000 to $229,900.

El Mirage improved from 310 sales to 510 sales, with the median price increasing from $127,060 in second quarter 2004 to $185,000 in second quarter 2005.

Goodyear moved from 515 to 620 sales, while the median price increased from $179,000 to $245,240.

Surprise increased from 1,045 sales to 1,390 sales, with the median price increasing from $158,000 to $231,000.