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Greater Phoenix Resale Numbers Hint at More Realistic Growth Rates


February 10, 2006

MESA, AZ - With 5,260 recorded sales in January 2006, the greater Phoenix resale market has continued to slow from the 10,700 recorded in August 2005. December 2005 had 6,480 sales, while there were 9,360 sales for a year ago. While the trend back to normalcy appears to be continuing, the impact of the holidays on recordings and the desire of people to look for a new home make January a poor barometer for the coming year. The basic direction of the local real estate market will probably not become known until the second quarter.

"The primary news of last year's housing market was the rapid rise in the median home price from $194,000 in January to $260,000 in December," said Jay Q. Butler, director of the Arizona Real Estate Center at Arizona State University's Polytechnic campus. "However, since the record of $263,000 was set in September, the growth rate has disappeared, with the median price being $257,000 in January, which is still well above last year's $194,000."

Along with a higher median home price, mortgage interest rates are higher than a year ago. Thus, affordability continues to be a concern. The average 30- year mortgage for January 2005 was 5.4 percent, while it was 5.8 percent for January 2006. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home increased from $925 to $1,280.

For the last year, the ever higher home prices have drawn people into the market based on continued optimistic growth assumptions about future prices. Thus, both investors and owner-occupants have been buying on future expectations about continued appreciation to provide for profit and/or refinancing opportunities. If home prices continue to be stable or even decline in some areas, owners may increasingly bring homes to the market, in order to lock in profits.

In order to allow people to buy their own or investment homes, there has been an ever increasing reliance on creative mortgage financing. 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.

Since the Greater Phoenix area is so large, the median price can range significantly from $675,000 in North Scottsdale to $128,000 in the Sky Harbor area of the city of Phoenix. For January 2006, 19 percent of all recorded sales were for homes priced from $125,000 to $199,999, 41 percent for $200,000 to $299,999 and 36 percent for homes priced over $300,000.

Over the last few years, the townhouse/condominium market has had increased popularity for owner-occupancy, especially for young and minority households, and investors. However, sales activity followed a pattern similar to the single family market with a slowing from 1,400 sales for December 2005 to 1,225 sales for January and down from last year's 1,675 sales. However, the median home price returned to the record $165,000, last achieved in November and well ahead of last year's $125,000.

The median square footage for a single-family home recorded sold in January 2006 was 1,620 square feet, which is smaller than the 1,640 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,090 square feet, which is smaller than 1,165 square feet reported a year ago.

  • In contrast to January 2005, recorded sales in the city of Phoenix decreased from 2,685 sales to 1,635 sales, while the median sales price increased to $207,000 from $154,000. Since Phoenix is a geographically large city, the median prices can range significantly such as $128,000 in the Sky Harbor area to $320,000 in the Union Hills area. The townhouse/condominium sector declined from 485 to 435 sales while the median price increased from $112,000 to $139,525
  • While the Scottsdale resale home market declined from 785 to 400 recorded sales, the median sales price continued its upward movement by increasing from $458,690 to $600,000. The median resale home price is $675,000 in North Scottsdale and $317,500 in South Scottsdale. The townhouse/condominium sector in Scottsdale also decreased from 380 to 205 sales, but the median sales price increased from $207,000 to $275,700.
  • The Mesa resale housing market declined from 1,060 to 615 sales, while the median price increased from $172,900 to $240,000. The townhouse/condominium sector also fell from 260 to 200 sales, while the median home price increased from $102,500 to $149,000.
  • Glendale decreased from 640 to 410 sales, but the median sales price increased from $171,450 to $238,500.The townhouse/condominium sector fell from 75 to 50 sales, while the median sales price increased from $99,700 to $130,000.
  • In comparison to a year ago, the Sun City resale market fell from 160 to 100 sales, the median sales price increased to $212,000 from $159,000. Resale activity in Sun City West also slowed from 95 to 40 sales, but the median sales price increased from $179,900 to $243,500.The townhouse/condominium market in Sun City declined from 110 to 60 recorded sales, while the median home price increased from $110,000 to $140,000. In Sun City West, activity remained at 20 sales and the median sales price increased from $129,900 to $203,450.
  • The resale market in Gilbert decreased from 565 to 310 sales, but the median sales price increased from $244,000 to $337,250. The townhouse/condominium market remained at 20 sales as the median sales price increased from $133,800 to $212,500.
  • For the city of Chandler, the resale market slowed from 625 to 330 recorded sales, while the median sales price increased from $219,000 to $305,000. The townhouse/condominium market declined from 65 to 45 sales and the median sales price increased from $120,000 to $177,750.
  • The resale market in Tempe decreased from 195 a year ago to 140 sales, with the median sales price increasing to $269,900 from $193,500. The townhouse/ condominium sector increased from 75 to 110 sales and the median sales price increased from $129,950 to $181,000.
  • The highest median sales price was in Paradise Valley at $1,507,500 with a median square foot house of 4,160 square feet.
    • In the West Valley, the following communities represent 10 percent of the resale market, which is the same as a year ago.
    • Avondale fell from 220 to 150 sales with the median price moving from $188,140 to $258,000.
    • El Mirage decreased from 150 to 70 sales, while the median home price went from $150,410 to $224,000.
    • Goodyear declined from 195 to 100 sales, while the median price increased from $204,900 to $275,000.
    • Surprise decreased from 370 sales ($195,000) to 165 sales ($249,000).