Greater Phoenix resale numbers spring back to 1996

March is typically an indicator for the coming resale home season, and with 4,335 recorded sales it’s showing signs of a continuing weak market. Even though it is an improvement over the 3,750 sales of February, it is significantly below last year’s 5,385 sales and is the lowest March since 1996, with 3,270 sales.

Although the year has been continually improving since January (3,350 sales), the year-to-date total of 11,395 sales is below last year’s 14,190 sales.

While there are many problems rising out of the hyper-resale market, many households were able to acquire homes with traditional financing, according to Jay Q. Butler, director of Realty Studies in the Morrison School of Management and Agribusiness at Arizona State University’s Polytechnic campus.

“People who settled in their dream homes with manageable mortgage payments have little incentive or pent-up demand to change their housing investment. Thus, lower sales activity should not be unexpected,” he said.

“During the last year, the housing market has been confronting issues derived from the hyper-market of previous years such as the subprime meltdown and overly ambitious investors. Unfortunately, there is increasing data, such as job losses and layoffs, that the economy is now weakening and will add further stress for the housing markets,” added Butler.

While there has been little attempt to help investors, there have been many programs started to help people save their homeownership. Most of the attempts have dealt with reset of higher interest rates, with the basic premise being that the home occupant has the income but not enough to satisfy the new mortgage payment. In a weak economy, many households now will not have the needed income to save their homes, even with a new mortgage payment plan.

Further, with increased energy and food costs, there is added strain on the household budget. Thus, the potential economic downturn and inflationary pressures will define how much further the housing market will worsen and when recovery will begin.

The median home price remained stable at $220,000, in contrast to last year’s $265,470. The lower median price is being driven by several forces including the large number of vacant homes, especially in certain neighborhoods.

Further, capital is available for lower-priced housing, but lacking in the higher priced housing market. The recent rise in the FHA limit from $271,050 to $346,250 will help some move-up market activity. However, the non-conforming limit is expected to remain at $417,000, which will be of little assistance to the higher priced market.

Last year, 39 percent of the resale homes sold for more than $300,000, while it was 27 percent for March 2008. Homes selling for under $200,000 have increased from last year’s 16 percent to a current 40 percent of the local resale housing market. The most evident impact of lower prices is improved affordability.

Even though mortgage interest rates increased from last year’s 5.8 to 5.9 percent, the much lower sales price allowed the monthly payment to decline from $1,325 to $1,110. While improving affordability based on lower home prices can greatly benefit buyers, it adversely impacts many owners and potential sellers whom are watching their limited equity erode, as prices decline to and even below existing debt level.

“The lower prices affect the ability and desire to continue owning the home and even overall confidence in the economy, which puts additional strain on the local housing market,” said Butler.

Changes in median prices can vary tremendously throughout the Valley. For the western suburbs the median price has fallen 21.2 percent from last year’s $231,000 to $182,125, while South Tempe moved down 9.7 percent ($291,000 to $262,500). Since the greater Phoenix area is so large, the median price can range significantly from $605,000 ($573,570 in February) in North Scottsdale to $148,800 ($157,700 in February) in the Maryvale area of the city of Phoenix.

With 685 recorded sales, the townhouse/condominium market improved from the 620 sales of February, but was well below last year’s 1,350 transactions. The median home price decreased from $174,500 in January 2007 to remain at $165,000, while it was $181,000 a year ago. The underlying reasons for the fairly stable price can run the gamut from the return of the seasonal visitor and international investors to new households satisfying their initial housing needs.

The median square footage for a single-family home recorded sold in March 2008 was 1,770 square feet, which is larger than the 1,700 square feet for a year ago. In the townhouse/condominium sector, the median square footage was 1,160 square feet, which is larger than the 1,120 square feet reported a year ago.

• In contrast to March 2007, recorded sales in the city of Phoenix decreased from 1,450 sales to 1,075, while the median sales price decreased to $185,455 from $228,000. Since Phoenix is a geographically large city, the median prices can range significantly such as $148,800 ($157,700 in February) in the Maryvale area to $263,500 ($260,000 in February) in the Union Hills area. The townhouse/condominium sector decreased from 400 to 195 sales and the median price decreased from $165,000 to $149,000.
• The Scottsdale resale home market declined from 465 to 305 recorded sales, with the median sales price decreasing from last year’s $635,000 to $525,000. The median resale home price is $605,000 ($573,570 in February) in North Scottsdale and $260,000 ($254,000 in February) in South Scottsdale. The townhouse/condominium sector in Scottsdale decreased from 280 to 155 sales, and the median sales price decreased from $265,950 to $236,750.
• The Mesa resale housing market declined from 620 sales a year ago to 450, while the median price fell from $242,700 to $200,000 ($208,750 in February). The townhouse/condominium sector also fell from 190 to 90 sales, while the median home price decreased from $158,400 to $144,000.
• Glendale decreased from 355 to 260 sales, and the median sales price decreased from $248,250 a year ago to $209,750 ($202,000 in February). The townhouse/condominium sector decreased from 50 to 15 sales, while the median sales price increased from $148,850 to $155,000.
• For the city of Peoria, the resale market declined from 255 to 190 sales, while the median price moved from $270,000 to $235,900 ($225,300 in February). The townhouse/condominium sector decreased from 35 to 20 sales, while the median price increased from $165,000 to $175,700.
• In comparison to a year ago, the Sun City resale market declined from 150 to 100 sales, while the median sales price decreased to $182,500 from $200,000. Resale activity in Sun City West decreased from at 70 to 60 sales, and the median sales price decreased from $217,450 to $214,000. The townhouse/condominium market in Sun City decreased from 75 to 65 recorded sales, while the median home price decreased from $131,000 to $119,900. In Sun City West, activity stayed at 25 sales and the median sales price decreased from $190,000 to $130,970.
• The resale market in Gilbert increased from 290 to 295 sales, and the median sales price decreased from $295,500 to $245,000 ($254,700 in February). The townhouse/condominium market declined from 15 to 10 sales, as the median sales price decreased from $200,000 to $176,450.
• For the city of Chandler, the resale market declined from 380 to 325 recorded sales, with the median sales price decreasing from $293,850 to $234,000 ($245,000 in February). The townhouse/condominium market declined from 65 to 20 sales, and the median sales price went from $170,000 to $145,000.
• The resale market in Tempe decreased from 125 to 100 sales, with the median sales price decreasing from $278,750 to $237,000 ($240,000 in February). The townhouse/condominium sector fell from 95 to 35 sales, and the median sales price decreased from $198,500 to $160,000.
• The highest median sales price was in Paradise Valley at $1,750,000 with a median square foot house of 3,995 square feet.
• In the West Valley, the following communities represent 14 percent of the resale market.
  • Avondale decreased from 100 to 90 sales, with the median price moving from $232,280 to $185,130 ($194,570 in February).
  • El Mirage increased from 40 to 60 sales, while the median home price went from $213,750 to $146,900 ($149,500 in February).
  • Goodyear went from 105 to 125 sales, while the median price decreased from $255,000 to $220,000 ($220,490 in February).
  • Surprise improved 250 to 285 sales, but the median price went from $241,500 to $205,000 ($213,740 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

Realty Studies is associated with the Morrison School of Management and Agribusiness at Arizona State University’s Polytechnic campus. Realty Studies collects and analyzes data concerning real estate in the greater Phoenix metropolitan area. Realty Studies 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. To subscribe to RSS feed for Realty Studies news, visit http://www.poly.asu.edu/realty/rss.html.