Greater Phoenix October Resale Home Market Transactions Down from a Year Ago

The local resale home market continued to slow in October 2005 with 8,420 recorded sales, while it was 9,815 in September and 10,670 sales for August. It is also the first month in 2005 that is below a year ago recorded sales, which was at 8,755. Even with the slowing, recorded sales totaled 97,165 transactions, while it was 84,555 sales for 2004 year-to-date.

Also, for the first time since December 2003, the median home price declined from the prior month, going from $263,000 to $259,900. However, it was still 44 percent above last year’s $180,000. Even with a decline in median price and low interest rates, affordability continues to be an issue. Based on October, the average 30-year mortgage for October 2004 was 5.6 percent, while it was 5.5 percent for October 2005. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home increased from $880 to $1,255.

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.

"Because it is difficult to sustain the levels of activity evident in the last year, the cooling is a good sign for the sustainability of the market," says Jay Q. Butler, director of the Arizona Real Estate Center at ASU’s Polytechnic campus.

"The primary key to sustainability is for the market to return to its more normal or typical pattern of sales activity and home price movement. However, with some slowing in the growth price rate, people may be bringing their homes to the market to lock in their profits," adds Butler.

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 $655,000 in North Scottsdale to $138,750 in the Sky Harbor area of the city of Phoenix. For October 2005, 21 percent of all recorded sales were for homes priced from $125,000 to $199,999, 39 percent for $200,000 to $299,999 and 36 percent for homes priced over $300,000.

Over the last few years, townhouse/condominium market has had increased popularity for owner-occupancy, especially for young and minority households, and investors. However, it did follow a pattern similar to the single family market, with a slowing from 1,770 sales for September 2005 to 1,715 sales for October. However, unlike the single-family market, the resale townhouse/condominium market was above last year’s 1,540 sales. The 2005 year-to-date is 18,290 units, while it was 15,540 for 2004. Also the median home price continues to escalate, moving from $160,000 in September to $162,000, while it was $117,000 for a year ago.

The median square footage for a single-family home recorded sold in October 2005 was 1,595 square feet, which is smaller than the 1,665 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,105, which is smaller than 1,130 square feet reported a year ago.

• In contrast to October 2004, recorded sales in the city of Phoenix increased from 2,445 sales to 2,520 sales, while the median sales price increased to $207,515 from $146,000. Since Phoenix is a geographically large city, the median prices can range significantly such as $138,750 in the Sky Harbor area to $330,000 in the Union Hills area. The townhouse/condominium sector improved from 480 to 575 sales while the median price increased from $105,900 to $130,000.
• While the Scottsdale resale home market declined from 745 to 575 recorded sales, the median sales price continued its upward movement by increasing from $412,500 to $559,000. The median resale home price is $655,000 in North Scottsdale and $310,000 in South Scottsdale. The townhouse/condominium sector in Scottsdale also decreased from 360 to 325 sales, but the median sales price increased from $183,000 to $245,000.
• The Mesa resale housing market declined slightly from 1,040 to 1,015 sales, while the median price increased from $165,000 a year ago to $245,000. The townhouse/condominium sector improved from 225 to 260 sales, while the median sales price increased from $99,500 to $154,100.
• Glendale improved from 645 to 690 sales and the median sales price increased from $158,700 to $242,000.The townhouse/condominium sector grew from 70 to 85 sales, while the median sales price increased from $82,750 to $128,500.
• In comparison to a year ago, the Sun City resale market fell slightly from 165 to 145 sales, with the median sales price increasing to $220,000 from $148,400. Resale activity in Sun City West also slowed from 75 to 65 sales, but the median sales price increased from $182,000 to $245,000.The townhouse/condominium market in Sun City remained at 70 recorded sales, while the median home price increased from $90,000 to $144,950. In Sun City West, activity declined slightly from 20 to 15 sales, but the median sales price increased from $118,750 to $172,500.
• The resale market in Gilbert decreased from 570 to 485 sales, but the median sales price increased from $220,000 to $324,950. The townhouse/condominium market remained at 20 sales as the median sales price increased from $125,000 to $219,700.
• For the city of Chandler, the resale market slowed from 615 to 540 recorded sales, while the median sales price increased from $196,450 to $295,500. The townhouse/condominium market improved from 60 to 100 sales and the median sales price increased from $118,500 to $174,000.
• The resale market in Tempe decreased from 220 to 195 sales, with the median sales price increasing to $275,000 from $187,500 a year ago. The townhouse/condominium sector increased from 95 to 115 sales and the median sales price increased from $122,450 to $189,900.
• The highest median sales price was in Paradise Valley at $1,668,000 with a median square foot house of 4,035 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 215 to 190 sales with the median price moving from $170,000 to $256,000.
• El Mirage remained at 150 sales, while the median home price went from $141,000 to $222,500.
• Goodyear declined from 185 to 165 sales, while the median price increased from $195,500 to $285,000.
• Surprise decreased from 315 sales ($178,500) to 305 sales ($259,900).