State Real Estate Market Outlook
Realty Market Outlook Arizona State Profile - Spring 2006
Housing market conditions warrant monitoring.
Although Arizona continued to attract new residents, housing permit issuance eased during 2005. Phoenix reported over 5,000 fewer single family permits in 2005 compared to 2004 levels, a decline of about 10 percent. This reversal could portend of a slowdown in construction activity.
Deteriorating affordability, particularly in Prescott, Tucson, and Phoenix, and rising interest rates may further weigh on the housing market.
Nevertheless, Arizona’s year-over-year home price gains measured 34.9 percent in fourth quarter 2005, led by 39.7 percent gains in Phoenix, and outpaced all other states.
Innovative mortgages and investors may be influencing Arizona housing demand. Interest-only and negative amortization loans accounted for 55 percent of non-prime mortgage originations during the first 11 months of 2005. During the same period, investors and second-home purchasers accounted for 30 percent of Arizona Alt-A mortgage originations.
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