Valley home prices climb despite drop in sales

Home prices continued to climb in many areas throughout the Valley in 2006, even as home sales plunged from 2005’s record heights.

Some 67,035 sales of existing homes were recorded in 2006, a 39.5 percent drop from the year before, according to a report released Wednesday by Arizona State University’s Realty Studies department.

Meanwhile, the median price of a resale home hit $260,600, up 8.4 percent from the previous year.

After flooding the market and driving up prices in recent years, investors now trying to unload properties likely contributed significantly to the market slowdown, Realty Studies director Jay Butler said.

“People would like to see that hypermarket come back but realize it’s not going to,” Butler said.

Still, industry observers are optimistic about 2007.

Home prices are expected to rise 3 percent to 5 percent this year, and sales should pick up in the spring, Scottsdale real estate agent John Wake said.

Wake said he believes buyers also will jump back into the market after sitting on the sidelines for fear of prices falling.

“A lot of people are just waiting to know the bottom has hit,” he said.

The supply of new homes on the market also has peaked and is heading down, Wake said. That means buyers will likely see fewer of the wild home discounts offered by builders in recent months, he said.

Existing-home inventory has also inched downward in recent months, said Robert Rucker, CEO of the Arizona Regional Multiple Listing Service.

Roughly 43,140 homes are on the market, down from a peak of about 48,000 a few months ago.

Inventory will likely continue going down in 2007 and reach a more normal level of 30,000 to 35,000 listings, he said.

Despite a leveling off, 2006 was still the fourth-best resale market on record, falling between 2002 with 62,625 sales and 2003 with 73,785 sales.

The market is slightly below historical norms, but it should start to pick up in the spring, Butler said. Some areas are seeing declining prices, and foreclosures are expected to rise this year. Many of the homes facing foreclosure will likely belong to investors, Butler said.

“They bought too many. They paid too much,” he said. For 2006, 16 percent of recorded resales in the Valley were for homes priced from $125,000 to $199,999, 43 percent for homes in the $200,000 to $299,999 range and 38 percent for homes costing more than $300,000. The record median price of $267,000 was set in June.