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Greater Phoenix Resales for Third Quarter Finish Strong


October 12, 2005

MESA, Ariz. -- The local resale home market slowed slightly in September 2005 with 9,815 recorded sales, while it was 10,670 sales for August 2005. It was, however, above last year’s 7,780 sales.

For third quarter 2005, 30,715 sales were recorded, which is very similar to the 30,705 sales for second quarter 2005, but still ahead of last year’s 27,580 sales. So far this year, recorded sales totaled 88,750 transactions, while it was 75,800 sales for 2004 year to date.

The median home price set another record in September 2005 at $263,000, in contrast to $258,700 for August 2005. While this was a 47 percent increase over last year’s $179,500, it did represent a slow down for the month-to-month changes in 2005 from 4.4 percent to 1.6 percent. For the third quarter, the median home price was $259,700, while it was $235,500 in Second Quarter 2005 and $177,500 a year ago.

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.

Based on Third Quarter activity, the average 30-year mortgage in 2004 was 5.6 percent, while it was 5.5 percent for 2005. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home increased from $865 to $1,255.

The Resale Home Affordability Index for Third Quarter 2005 stood at 78, which is the lowest value since the early 1980s. "The resale home index value stood at 86 in Second Quarter 2005 and 111 for a year ago," says Jay Butler, ASU director of the Arizona Real Estate Center at the Polytechnic campus.

"In searching for affordability, people are moving to the outer fringes of the area where commutes are becoming increasingly expensive in light of ever-higher gasoline prices and longer commute times," adds Butler.

With declining affordability, there has been an increased reliance on creative mortgage financing to allow people to buy, both owner-occupants and investors. 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," says Butler.

For the last year, the higher home prices have drawn people into the market based on continued optimistic growth assumptions about future prices. 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. However, with some slowing in the growth price rate, people may be brining their home to the market to lock in their profits.

Since the Greater Phoenix area is so large, the median price can range significantly from $641,500 in North Scottsdale to $129,000 in the Sky Harbor area of the city of Phoenix. For Third Quarter 2005, 20 percent of all recorded sales were for homes priced from $125,000 to $199,999, 40 percent for $200,000 to $299,999 and 38 percent for homes priced over $300,000.

In light of the higher home prices for single-family homes, the townhouse/ condominium market has had increased popularity for owner-occupied, especially for young and minority households, as well as investors. With 1,770 sales for September 2005, the resale townhouse/condominium market also slowed from 1,975 sales in August 2005, but still above the 1,345 sales recorded for September 2004. The monthly activity brought the Third Quarter 2005 to 5,655 sales, while it was 5,858 sales in Second Quarter 2005 and 4,725 sales a year ago. The 2005 year-to-date is 16,575 units, while it was 14,000 for 2004 year to date. Even with some slowdown in sales activity, the quarterly median home price was $159,000, while it was $113,000 for a year ago.

The median square footage for a single-family home recorded sold in Third Quarter 2005 was 1,640 square feet, which is smaller than the 1,705 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,110 square feet, which is smaller than 1,140 square feet reported a year ago.

  • In contrast to Third Quarter 2004, recorded sales in the city of Phoenix increased from 7,315 sales to 8,550 sales, while the median sales price increased to $205,000 from $145,000. Since Phoenix is a geographically large city, the median prices can range significantly such as $129,000 in the Sky Harbor area to $333,750 in the Union Hills area. The townhouse/condominium sector improved from 1,340 to 1,720 sales while the median price increased from $99,500 to $132,500.
  • While the Scottsdale resale home market declined from 2,490 in Third Quarter 2004 to 2,185 recorded sales, the median sales price continued its upward movement by increasing from $385,000 a year ago to $550,000. The median resale home price is $641,500 in North Scottsdale and $303,000 in South Scottsdale. The townhouse/condominium sector in Scottsdale improved from 1,075 to 1,135 sales and the median sales price increased from $170,520 to $245,000.
  • The Mesa resale housing market increased from 3,395 to 3,700 sales in Third Quarter 2005, while the median price increased from $159,900 a year ago to $237,500. The townhouse/condominium sector also improved from 760 to 970 sales, while the median home price increased from $97,900 to $135,000.
  • Glendale improved from 2,055 to 2,385 sales and the median sales price increased from $163,000 to $235,900.The townhouse/condominium sector grew from 175 to 280 sales, while the median sales price increased from $89,900 to $117,000.
  • In comparison to a year ago, the Sun City resale market grew slightly from 430 to 445 sales, with the median sales price increasing to $198,200 from $136,500. Resale activity in Sun City West remained at 200 recorded sales, but the median sales price increased from $166,000 to $235,000.The townhouse/condominium market in Sun City decreased from 250 to 240 recorded sales, while the median home price increased from $85,250 to $136,000. In Sun City West, activity was consistent at 60 sales, but the median sales price increased from $126,500 to $163,750.
  • The resale market in Gilbert increased from 1,790 in Third Quarter 2004 to 1,880 sales, with the median sales price increasing from $210,000 to $315,000. The townhouse/condominium market grew from 60 to 105 sales as the median sales price increased from $135,250 to $195,000.
  • For the city of Chandler, the resale market improved from 2,105 to 2,240 recorded sales, while the median sales price increased from $189,900 to $288,900. The townhouse/condominium market improved from 200 to 265 sales and the median sales price increased from $109,950 to $170,000.
  • The resale market in Tempe increased from 685 to 765 sales in Third Quarter 2005, with the median sales price increasing to $270,000 from $185,000. The townhouse/condominium sector increased from 320 to 380 sales and the median sales price increased from $119,000 to $176,100.
  • The highest median sales price was in Paradise Valley at $1,350,000 with a median square foot house of 3,630 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.
    • Avondale grew from 640 in Third Quarter 2004 to 790 sales, with the median price moving from $165,000 to $255,000.
    • El Mirage improved from 385 sales ($134,000) to 565 sales ($220,000).
    • Goodyear improved from 510 to 600 sales, while the median price increased from $184,000 to $276,000.
    • Surprise increased from 980 sales ($163,520) to 1,290 sales ($255,000).