Greater Phoenix Resale Home Market Continues Trend to Normalcy
Tuesday, April 11, 2006
Following a very typical pattern, the greater Phoenix resale market has
rebounded slightly in March 2006 with 7,265 sales. This improvement over
the 5,455 sales for February 2006, but well below last year's 10,035 sales.
Even with the improvement in activity, first quarter 2006 with 17,980 sales is
below 27,325 sales for a year ago and 22,090 sales in fourth quarter 2005.
"This is the weakest quarter since first quarter 2003 with 15,030 sales,"
said Jay Q. Butler, director of the Arizona Real Estate Center at ASU's
Polytechnic campus. "March tends to be good month as its represents closed
transaction from people who moved into the Valley during the early part of
the year and those that took time during the holidays to look for a new
home."
While the trend toward normalcy appears to be continuing, the overall
direction of the local resale housing estate market will probably not become
clearer until into 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.
However, since the record of $263,000 was set in September, the growth rate
had been disappearing with the median price being $263,000 in March,
which is sill above last year's $213,000. For the first quarter of 2006, the
median home price was $260,190, above last year's $203,000, but only
slightly above the $260,000 for fourth quarter 2005.
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 first quarter 2005 was 5.4 percent, while it was
5.8 percent for first quarter 2006. Based on an 85 percent loan-to-value, the
monthly mortgage payment for the median price home increased from $970
to $1,300.
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 re-financing 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 $700,000 in North Scottsdale to $150,000 in the Sky Harbor
area of the city of Phoenix. For March 2006, 17 percent of all recorded sales
were for homes priced from $125,000 to $199,999, 43 percent for $200,000 to
$299,999 and 39 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 an increase from 1,260 sales
for February 2006 to 1,750 sales for March, but still below last year's, 1,880
sales. For the first quarter 2006, there was 4,235 sales, while there was 5,075
sales a year ago and 4,710 sales in fourth quarter 2005. Even the median
home price declined from a record $175,000 in February 2006 to $173,000,
but still above last year's $130,000.
The median square footage for a single-family home recorded sold in
March 2006 was 1,615 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 1,095 square feet, which is smaller than 1,145 square feet
reported a year ago.
- In contrast to March 2005, recorded sales in the city of Phoenix decreased
from 2,835 sales to 2,300 sales, while the median sales price increased to
$220,000 from $165,000. Since Phoenix is a geographically large city, the
median prices can range significantly such as $150,000 in the Sky Harbor
area to $326,000 in the Union Hills area. The townhouse/condominium
sector increased from 410 to 570 sales while the median price increased
from $113,750 to $149,025.
- While the Scottsdale resale home market declined from 810 to 550
recorded sales, the median sales price continued its upward movement
by increasing from $465,500 to $595,000, while it was $575,000 in
February 2006. The median resale home price is $700,000 ($657,800 in
January) in North Scottsdale and $319,250 ($315,500 in February) in
South Scottsdale. The townhouse/condominium sector in Scottsdale also
decreased from 420 to 380 sales, but the median sales price increased
from $250,000 to $265,000.
- The Mesa resale housing market declined from 1,125 a year ago to 830
sales, while the median price increased from $189,000 to $243,500 ($245,
000 in February). The townhouse/condominium sector also fell from 270
to 240 sales, while the median home price increased from $108,000 to
$153,250.
- In Glendale, the resale home market decreased from 695 a year ago to
570 sales, but the median sales price increased from $195,000 to $251,250
($250,000 in February).The townhouse/condominium sector improved
from 85 to 100 sales, while the median sales price increased from $91,420
to $143,850.
- In comparison to a year ago, the Sun City resale market fell from 215 to
150 sales, the median sales price increased to $210,000 from $166,000.
Resale activity in Sun City West also fell from 95 to 65 sales, but the
median sales price increased from $189,900 to $247,500.The
townhouse/condominium market in Sun City declined from 140 to 105
recorded sales, while the median home price increased from $113,100 to
$144,950. In Sun City West, activity fell slightly from 25 to 20 sales, but
the median sales price increased from $130,000 to $183,500.
- The resale market in Gilbert decreased from 605 to 355 sales, but the
median sales price increased from $252,820 to $322,500 ($341,000 in
February). The townhouse/condominium market remained at 25 sales as
the median sales price increased from $159,000 to $210,000.
- For the city of Chandler, the resale market slowed from 680 to 510
recorded sales, while the median sales price increased from $239,900 to
$295,000 ($299,900 in February). The townhouse/condominium market
declined from75 to 55 sales and the median sales price increased from
$126,750 to $175,000.
- The resale market in Tempe decreased from 230 to 190 sales, with the
median sales price increasing to $288,400 ($300,000 in February) from
$215,900. The townhouse/condominium sector slowed from 110 to 90
sales and the median sales price increased from $135,000 to $190,500.
- The highest median sales price was in Paradise Valley at $1,595,000 with
a median square foot house of 3,300 square feet.
- In the West Valley, the following communities represent 8 percent of the
resale market, which is down from the 10 percent of a year ago.
- Avondale fell from 235 to 160 sales with the median price
moving from $205,000 to $256,000 ($261,000 in February).
- El Mirage decreased from 120 to 60 sales, while the median
home price went from $170,000 to $220,000 ($221,000 in
February).
- Goodyear declined from 225 to 95 sales, while the median
price increased from $231,000 to $281,000 ($289,000 in
February).
- Surprise decreased from 450 sales to 285 sales, while the
median price increased from $208,000 a year ago to $255,500
($260,750 in February).
CONTACT(S): Jay Q. Butler, 480/727-1300, jay.butler@asu.edu
Christine Lambrakis, 480/727-1173, 602/316-5616, lambrakis@asu.edu
The Arizona Real Estate Center is associated with East College
at Arizona State University's Polytechnic campus. The center
collects and analyzes data concerning real estate in the greater
Phoenix metropolitan area. The center is a comprehensive and objective
source of real estate information for private, public and governmental
agencies. Its director, Dr. Jay Q. Butler, may be reached at (480) 727-
1300 or e-mail him at Jay.Butler@asu.edu.
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