Greater Phoenix Resale Market Picks Up Pace in October
The Arizona Real Estate Center at ASU detailed recent homes sales
and concerns about declining affordability of homes. November 10,
2004.
The Greater Phoenix resale market showed some improvement in October,
reporting 8,755 sales compared to September's 7,780 sales. The October
total is higher than last year's 5,285 sales. The 2004 year-to-date
total of 84,550 homes already exceeds the YTD record 73,785 homes
sold in 2003 and 62,625 in 2002.
In midst of the continuing record activity, there is mounting concern
about the affordability of housing. Since January, the median home
price has increased from $156,000 to another monthly record in October
at $180,000, up from $179,500 in September and $154,000 a year ago.
The resale affordability index is 100, down from 124 a year ago.
The last time the resale affordability index stood at 100 was in
1989 when the median price was $78,000, but the effective interest
rate then was 11 percent. An index value of 100 or higher means
the typical home buyer is able to afford a median-priced resale
home at the current financing, based on the current median resale
price and household income.
In remembering the late 1970s and 1980s, the question is whether
the market can be sustained - especially the continuing rise of
home prices. The increasing number of rental properties has resulted
in extreme competition based on lower rents and even concessions.
Rental difficulties could lead to fewer future buyers and more homes
on the market. For owner-occupants, higher interest rates combined
with stable income and higher home prices will adversely impact
the affordability of housing, leading to a potential slowdown of
activity. Additionally, people with low-interest mortgages have
little incentive to move and thus provide some additional stimulus
to the market.
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The Arizona Real Estate Center is associated with East College
at Arizona State University's east 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.
