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July's Resale Numbers Continue to Slow


August 10, 2006

MESA, Ariz. - With 5,545 recorded sales, the resale home market in July continued the slowing trend. Although this activity is slightly above the 5,460 sales of June 2006, it is well below last year's 10,200 recorded sales. Historically, resale housing activity in June and July is one of the better times of the year. This is the weakest July since 5,240 sales were recorded in July 1999. So far in 2006, there have been a total of 41,835 sales, while it stood at 68,235 sales in 2005 YTD. While it was very unlikely that the market could have sustained the level of 2005, the current level of activity is very comparable to that recorded in the years of 2003 YTD (41,200 sales) and 2004 YTD (56,745 sales).

The primary news of the last year's housing market was the rapid rise in the median home price from $194,000 in January to $260,000 in December. For July 2006, the median home price of $264,900 was a retreat from the record $267,000 in June, but was above the $255,000 recorded a year ago.

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 fairly stable or even increase as the move-up market works to be satisfied. For July 2006, 14 percent of all recorded sales were for homes priced from $125,000 to $199,999, 45 percent for $200,000 to $299,999 and 38 percent for homes priced over $300,000.

Although the median home price showed a slight decrease, mortgage interest rates are higher than a year ago. Thus, affordability continues to be an issue. The average 30-year mortgage for July 2005 was 5.4 percent, while it was 6.4 percent for July 2006. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home increased from $1,210 to $1,400. Since the Greater Phoenix area is so large, the median price can range significantly from $705,000 ($717,500 in June) in North Scottsdale to $152,000 ($130,500 in June) in the Sky Harbor area of the City of Phoenix.

Another sign of a changing housing market is the increasing number of vacant homes. During the second quarter of each year, the Arizona Real Estate Center conducts a survey of housing in Maricopa County. Based on the annual survey, it was determined that 3 percent or 30,200 of the single-family homes were vacant. This is a significant increase from last year's 2 percent or 19,400 homes.

Even though the recent rise in interest rates has slowed, stable home appreciation and household income continues to raise 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 small increase from 1,035 sales for June 2006 to 1,125 sales for July, which was below last year's 1,905 sales. So far in 2006, there have been 9,255 sales, while there was12,830 sales a year ago. However, the median home price increased slightly from $174,700 in June to a record $179,000, while it was $156,125 for a year ago.

The median square footage for a single-family home recorded sold in July 2006 was 1,650 sq.ft., which is smaller than the 1,655 sq.ft. reported a year ago. In the townhouse/condominium sector, the median square footage was 1,090 sq.ft, which is smaller than 1,120 square feet reported a year ago.

In contrast to July 2005, recorded sales in the City of Phoenix decreased from 2,780 sales to 1,705 sales, while the median sales price decreased to $223,000 from $225,000 in June, while it was $197,000 for a year ago. Since Phoenix is a geographically large city, the median prices can range significantly such as $152,000 in the Sky Harbor area to $312,000 ($323,700 in June) in the Union Hills area. The townhouse/condominium sector decreased from 575 to 385 sales while the median price increased from $130,000 to $143,000.

While the Scottsdale resale home market declined from 745 to 435 recorded sales, the median sales price increased slightly from last year's $560,000 to 580,000, while it was $640,000 in June 2006. The median resale home price is $705,000 ($717,500 in June) in North Scottsdale and $304,425 ($325,000 in June) in South Scottsdale. The townhouse/condominium sector in Scottsdale also decreased from 395 to 230 sales, but the median sales price increased from $246,250 to $260,000.

The Mesa resale housing market declined from 1,225 to 610 sales, while the median price increased from $230,000 to $249,900 ($247,600 in June). The townhouse/condominium sector also fell from 365 to 150 sales, while the median home price increased from $128,000 to $163,250.

Glendale decreased from 750 to 455 sales, but the median sales price increased from $225,000 to $249,000 ($253,000 in June).The townhouse/condominium sector also declined from 80 to 55 sales, while the median sales price increased from $118,500 to $145,000.

For the city of Peoria, the resale market fell from 470 sales to 270 sales, while the median price moved from $260,000 to $270,000 ($272,900 in June).The townhouse/condominium sector slowed from 50 to 20 sales and the median price went from $137,000 to $180,000.

In comparison to a year ago, the Sun City resale market fell from 140 to 80 sales, the median sales price increased to $204,000 from $190,000. As resale activity in Sun City West fell from 70 to 40 sales, the median sales price decreased from $258,950 in June to $240,000, which is the same as a year ago. The townhouse/condominium market in Sun City declined from 70 to 40 recorded sales, while the median home price increased from $135,000 to $139,450. In Sun City West, activity fell from 25 to 15 sales, but the median sales price increased from $164,000 to $176,750.

The resale market in Gilbert decreased from 650 to 315 sales, but the median sales price increased from $315,000 to $335,000 ($330,000 in June). The townhouse/condominium market fell from 30 to 10 sales as the median sales price increased from $190,000 to $215,000.

For the City of Chandler, the resale market slowed from 745 to 380 recorded sales, while the median sales price increased from $282,000 to $300,500 ($295,000 in June). The townhouse/condominium market declined from 80 to 40 sales and the median sales price increased from $159,950 to $177,500.

The resale market in Tempe decreased from 270 to 160 sales, with the median sales price increasing to $286,000 ($298,500 in June) from $270,000. The townhouse/condominium sector slowed from 130 to 90 sales and the median sales price increased from $171,600 to $197,750.

The highest median sales price was in Paradise Valley at $1,400,000 with a median square foot house of 3,295 square feet.

In the West Valley, the following communities represent 9 percent of the resale market, which is down from the 11 percent of a year ago.

Avondale fell from 275 to 125 sales with the median price moving from $250,000 to $259,900 ($259,050 in June).

El Mirage decreased from 185 to 80 sales, while the median home price went from $216,150 to $220,000 ($215,000 in June 2006)

Goodyear declined from 215 to 85 sales, while the median price increased from $274,950 to $295,000 ($290,000 in June).

Surprise decreased from 425 sales ($250,000) to 205 sales ($253,500), while it was $254,900 in June.