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Greater Phoenix Resale Numbers for June Show Signs of Weaker Market


July 12, 2006

MESA, Ariz. - Historically, June is one of the better months of the year for resale housing activity. However, the 5,460 recorded sales for June 2006 is truly one of the initial signs that the resale market is growing weaker. This level of activity is down from the 6,870 sales of May 2006 and well below last year's 11,545 sales year to date. This is the weakest June since 2000 when 5,020 sales were recorded.

For 2006, there have been a total of 36,290 sales, while it stood at 58,030 sales in 2005 year to date. It was unlikely that the market could have sustained the level of activity experienced in 2005, but the current level of activity is very comparable to that recorded in 2003 year to date (34,880 sales) and 2004 year to date (48,220 sales).

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. Although the median resale price in June set a new record at $267,000 compared to $249,900 for a year ago, the growth rate has been disappearing, with the median price being up slightly in May at $265,000, and $264,900 in April.

As the housing market slows, the entry-level sector basically disappears, while the move-up markets garner a larger share of the remaining activity. Thus, it is not unusual to see median prices to be stable or even increase as the move-up market works to be satisfied. For June 2006, 14 percent of all recorded sales were for homes priced from $125,000 to $199,999, 44 percent for $200,000 to $299,999 and 39 percent for homes priced more than $300,000.

Along with a higher median home price, mortgage interest rates are higher than a year ago. Thus, affordability continues to be an issue. The average 30-year mortgage for June 2005 was 5.3 percent, and 6.3 percent for June 2006. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home increased from $1,180 to $1,405. Since the Greater Phoenix area is so large, the median price can range significantly from $717,500 in North Scottsdale to $130,500 in the Sky Harbor area of the city of Phoenix.

"When purchasing a home for investment or occupancy, the rapid growth in price that was so evident in much of 2005 is somewhat soothing to the uncertainty of the buying decision," said Jay Butler, director of the Arizona Real Estate Center at Arizona State University's Polytechnic campus. "If home prices continue to be stable or even decline in some areas, potential buyers may be increasingly reluctant to make the purchasing decision, because future appreciation is much more uncertain."

With interest rates, especially short-term ones, continuing to increase and stable home appreciation, there is increasing concern about the ability of some homeowners to maintain their homes. This may be especially evident for those that have used some of the more creative financing instruments, such as option payment plans and initially low interest rate adjustable mortgages.

Over the last few years, the townhouse/condominium market has had increased popularity for owner-occupancy, especially for young and minority households, and investors. Sales activity followed a pattern similar to the single family market with a decrease from 1,470 sales for May 2006 to 1,035 sales for June, which is below last year's 2,125 sales. For 2006, there have been 8,125 sales recorded, while there were 10,920 sales a year ago. Further, the median price declined slightly from $175,000 in May to $174,700 in June, while it was $151,000 for a year ago.

The median square footage for a single-family home recorded sold in June 2006 was 1,640 square feet, which is smaller than the 1,660 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,090 square feet, which is smaller than 1,120 square feet reported a year ago.

  • In contrast to June 2005, recorded sales in the city of Phoenix decreased from 3,050 sales to 1,725 sales, with the median sales price remaining unchanged in June at $225,000, while it was $190,215 for a year ago. Since Phoenix is a geographically large city, the median prices can range significantly such as $130,500 in the Sky Harbor area to $323,700 in the Union Hills area. The townhouse/condominium sector decreased from 655 to 300 sales while the median price increased from $125,000 to $150,000.
  • While the Scottsdale resale home market declined from 920 recorded sales for a year ago to 465, the median sales price continued its upward movement increasing from $559,000 a year ago to $640,000. The median resale home price for June was $717,500 in North Scottsdale and $325,000 in South Scottsdale. The townhouse/condominium sector in Scottsdale also decreased from 465 to 250 sales, but the median sales price increased from $254,000 a year ago to $264,750.
  • The Mesa resale housing market declined from 1,340 recorded sales for a year ago to 585, while the median price increased from $220,000 to $247,600. The townhouse/condominium sector also fell from 350 to 160 sales, while the median home price increased from $121,000 to $156,250.
  • Glendale decreased from 880 to 430 sales, but the median sales price increased from $220,000 to $253,000.The townhouse/condominium sector also declined from 110 to 70 sales, while the median sales price increased from $101,750 to $145,000.
  • For the city of Peoria, the resale market fell from 560 sales to 250 sales, while the median price moved from $255,000 to $272,900. The townhouse/condominium sector slowed from 40 to 35 sales and the median price went from $140,000 to $163,500.
  • In comparison to a year ago, the Sun City resale market fell from 200 to 75 sales, the median sales price increased to $215,000 from $186,200. Resale activity in Sun City West also fell from 90 to 45 sales, but the median sales price increased from $235,000 to $258,950. The townhouse/condominium market in Sun City declined from 85 to 45 recorded sales, while the median home price increased from $128,000 to $143,250. In Sun City West, activity fell from 25 to 15 sales, but the median sales price increased from $175,000 to $178,000.
  • The resale market in Gilbert decreased from 795 to 330 sales, but the median sales price increased from $291,500 to $330,000. The townhouse/condominium market fell from 30 to 10 sales as the median sales price increased from $186,475 to $238,750.
  • For the city of Chandler, the resale market slowed from 760 recorded sales for a year ago to 380, while the median sales price increased from $275,000 to $295,000. The townhouse/condominium market declined from 95 to 40 sales and the median sales price increased from $151,000 to $176,450.
  • The resale market in Tempe decreased from 270 to 160 sales, with the median sales price increasing to $298,500 from $245,000 a year ago. The townhouse/condominium sector slowed from 135 to 70 sales and the median sales price increased from $159,500 to $191,000.
  • The highest median sales price was in Paradise Valley at $1,425,000 with a median square foot house of 3,115 square feet.
  • In the West Valley, the following communities represent 9 percent of the resale market, which is down from the 10 percent of a year ago.
    • Avondale fell from 265 to 120 sales with the median price moving from $238,000 to $259,050.
    • El Mirage decreased from 185 to 85 sales, while the median home price went from $196,000 to $215,000.
    • Goodyear declined from 215 to 90 sales, while the median price increased from $262,000 to $290,000.
    • Surprise decreased from 535 recorded sales a year ago ($240,000) to 175 sales ($254,900).