2004-2005 ARIZONA’S HOUSING MARKET ...a glance This report was prepared for distribution at the Governor’s Affordable Housing Forum September 13-15, 2005 JANET NAPOLITANO GOVERNOR SHEILA D. HARRIS, PH.D. DIRECTOR Dear Reader, We are pleased to present you with an update of the Arizona housing market, as part of the 2005 Governor’s Affordable Housing Forum. Housing price data outside of Maricopa and Pima counties is difficult to obtain, as there is not a central source that tracks such information on a yearly basis. The data contained in this document has been obtained from a myriad of sources, including national and local associations of Realtors®, U.S. Department of Housing and Urban Development, Arizona Department of Economic Security, Arizona Real Estate Center at Arizona State University, U.S Census Bureau, Office of Federal Housing and Enterprise Oversight, as well as data produced by the Arizona Department of Housing. The data in this report highlights the difficulties that persons working in various professions have in finding an affordable home in their community. Many organizations from around the state are working to assist families in finding affordable housing in our local communities. However, more needs to be done if we are to ensure that the escalating prices do not begin to impact the economic growth of our state. The purpose of the Governor’s Affordable Housing Forum is to look at ways to address the growing problem of housing affordability. We trust that you will find this document, as well as the conference, beneficial. Sincerely, Sheila D. Harris, Ph.D. Director, Arizona Department of Housing Executive Director, Arizona Housing Commission Executive Director, Arizona Housing Finance Authority 1700 WEST WASHINGTON • SUITE 210 • PHOENIX, AZ 85007 • 602-771-1000 • FAX 602-771-1002 TTY 602-771-1001 • WEBSITE www.housingaz.com Home of the Arizona Housing Finance Authority ARIZONA’S HOUSING MARKET ...a glance Housing that is affordable and available is becoming increasingly challenging as prices continue to escalate throughout Arizona. Low mortgage rates have been one of the major contributing factors in the strong housing market of the last few years. However, if increases in mortgage rates continue, the housing market will slow down. One certain affect is that mortgage rate increases will make affordable home buying and renting for households even more challenging. This analysis and the associated data tables demonstrate the widening gap between household income and the cost of housing. It also reveals that in recent years home prices have been increasing at a much faster rate than household income. Of course, the rate of increase and the magnitude of home prices vary substantially among Arizona towns and regions. The data also demonstrates that some workforce members, such as retail sales and restaurant workers, cannot afford to buy a house or rent an apartment anywhere in Arizona. Other working professionals such as police officers, firefighters, teachers and nurses can afford to rent an apartment in most areas of Arizona but cannot afford to buy a house in more than half of the communities in Arizona. Many of those who need housing assistance are those who work hard but cannot find an affordable place to live. At the state level, a worker must make a wage of over $26.67 per hour to afford the purchase of a home and $12.38 to rent. In the urban areas of the state, a worker must earn a wage of over $28.25 an hour to qualify to buy a home and $15.71 to rent. In the rural areas of our state, it takes an hourly wage of $9.51 to $63.26 to buy a home and $10.46 to $16.88 per hour to rent. 1 GENERAL TRENDS IN ARIZONA’S HOUSING MARKET HOME PRICES vs. MEDIAN INCOME Home prices in Arizona have been increasing faster than income: The 1990 - 2000 Period (also see Table 5 in the Appendices) — In 11 out of 15 Arizona counties, home values appreciation rates were higher than households’ income. — Statewide, housing values increased by 52.2% compared to a 47.5% increase in income. — The greatest variations between home values and household income appreciation rates were reported in Gila (23.3%), Coconino (26.0%) and Apache Counties (85.6%). The 2000 - 2003 Period (also see Table 5 in the Appendices) 2 — During this period, home values in Maricopa County increased by 21.2%, as compared to only a 1.9% increase in median household income. — In Pima County housing values increased by 22.4% compared to a 2.9% increase in income. — Statewide housing values increased by 20.5% while income increased by less than 1%. — The same type of data is not available for rural Arizona counties. — Even though estimates for the 2003-2005 period are not available from the Census sources, data from other sources reveal that housing price appreciation rates have been much higher than increases in the household median income since 2003. GENERAL TRENDS IN ARIZONA’S HOUSING MARKET According to the National Association of REALTORS®, home prices in Arizona have been steadily on the rise. From 2002 to 2005, the average home price for a resale home in Arizona increased by 58.1% During the same period, median income increased by only 27%. Arizona Home Prices and Income $250,000 $200,000 $186,000 $191,600 $53,300 $149,000 $150,000 $128,200 $100,000 $51,900 $52,700 $53,300 2002 2003 2004 $50,000 $0 2005 Average Home Price Median Family Income Data Source: National Association of REALTORS® and U.S. Department of Housing and Urban Development 3 GENERAL TRENDS IN ARIZONA’S HOUSING MARKET HOW DOES ARIZONA’S HOUSING PRICE APPRECIATION COMPARE WITH OTHER STATES? Based on the House Price Index (HPI) prepared by the Office of Federal Housing Enterprise Oversight (OFHEO), housing price appreciation in Arizona was the seventh highest nationally for the first quarter of 2004 to the first quarter of 2005: STATE Nevada California Hawaii District of Columbia Florida Maryland Arizona New Mexico Utah Colorado U.S. Average 4 ANNUAL PRICE INCREASE RANKING 31.22% 25.42% 24.36% 22.21% 21.42% 20.97% 19.43% 9.43% 6.28% 4.75% 12.50% 1 2 3 4 5 6 7 25 35 47 - Data Source: Office of Federal Housing Enterprise Oversight (OFHEO) GENERAL TRENDS IN ARIZONA’S HOUSING MARKET MEDIAN HOME PRICES 2004-2005 Median home prices in Arizona communities range from a relatively low price of $68,000 in Douglas to a very high price of $454,500 in the Sedona area. In general, home prices are much higher in urban areas, communities that are attractive to visitors, and those with a relatively higher percentage of seasonal, recreational, or occasional use homes. RURAL AREAS WITH LOWER HOME PRICES $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 s gla u Do URBAN AREAS AND RURAL AREAS WITH HIGH AMENITIES AND TOURIST ATTRACTIONS rd ok ce ge nd ille les uis nd ga y a w be a ea olbro Saffo ren olid erv nL o o o o g a l l r o N S C E nsl Glo r A H F rin Sp Wi rke Pa $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 y tt e n a n ix w rea rea is t co so so Cit en Lo s id es uc ay w ho ff A ke aA aV su r o T r P a a n P a P t r h v -L S do gs Sie Ha top Se Fla ke ne i a P L DATA SOURCE: Arizona Department of Housing and Arizona Department of Economic Security 5 RURAL AND URBAN GROWTH: 2001-2004 EMPLOYMENT and POPULATION GROWTH 2001-2004 Most of the economic growth in the state in terms of employment and population occurred in the urban areas of Arizona during the 2001-2004 period. Statewide, employment increased by 174,200 jobs during that period. Of the total increase 145,399 jobs (83%) was attributed to employment growth in the urban areas. The remaining 28,800 jobs (17%) went to the rural areas. One out of every three additions to total employment statewide occurred in the low wage industries. Workers in these industries on average do not make enough money to buy a house or rent an apartment. Examples of such industries include retail trade, leisure and hospitality, real estate rental and leasing, and other services (i.e., repair shops, barber shops). Population in the state increased by 513,790 persons during the 2001-2004 period. More than two-thirds (76% or 392,650 persons) became residents of either Maricopa County or Pima County, both urban counties. The remaining 24% (121,140 persons) chose to live in one of the 13 rural counties of Arizona. The following charts illustrate that the share of employment growth in rural counties (17%) has been smaller than their population growth share (24%). It is very likely that limited employment opportunities in the rural counties are a contributing factor to this variation. 17% or 28,800 additional jobs 24% or 121,140 additional people 76% or 392,650 additional people Population Growth 8 Rural Urban 83% or 145,399 additional jobs Employment Growth DATA SOURCE: Arizona Department of Housing and Arizona Department of Economic Security APPENDICES TABLE 1 Housing Affordability for Homebuyers and Renters for Common Occupations in Selected Arizona Communities City/Town Bullhead City Casa Grande Coolidge Douglas Eloy Flagstaff Florence Globe Holbrook Kingman Lake Havasu City Nogales Parker Payson Phoenix - Resale Phoenix - New Pinetop-Lakeside Prescott Safford San Luis Sedona Show Low Sierra Vista Springerville Tucson* Winslow Yuma Arizona County Mohave Pinal Pinal Cochise Pinal Coconino Pinal Gila Navajo Mohave Mohave Santa Cruz La Paz Gila Maricopa Maricopa Navajo Yavapai Graham Yuma Yavapai/ Coconino Navajo Cochise Apache Pima Navajo Yuma - Median Home Price* 2 Bdrm Aptmt Monthly Rent** Hourly Wage Needed to Buy HOURLY WAGES Hourly Wage Needed to Rent Police Officer Teacher Retail Worker Total All Nurse Firefighter Waitperson Occupations $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 123,000 140,947 119,000 68,333 80,000 252,000 109,450 81,200 85,000 127,000 264,000 110,250 81,000 163,000 203,000 218,195 205,000 186,000 90,000 115,000 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 17.12 19.62 16.56 9.51 11.13 35.07 15.23 11.29 11.83 17.68 36.74 15.34 11.27 22.69 28.25 30.37 28.53 25.89 12.53 16.01 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 673 770 770 577 770 878 770 667 570 673 673 603 609 667 817 817 570 696 544 650 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 12.94 14.81 14.81 11.10 14.81 16.88 14.81 12.83 10.96 12.94 12.94 11.60 11.71 12.83 15.71 15.71 10.96 13.38 10.46 12.50 $ 17.52 $ 17.87 $ 17.87 $ 21.88 $ 17.87 $ 17.08 $ 17.87 $ 17.25 $ 16.26 $ 17.52 $ 17.52 $ 15.87 $ 15.87 $ 17.25 $ 23.00 $ 23.00 $ 16.26 $ 17.55 $ 15.87 $ 18.82 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 15.87 15.54 15.54 15.33 15.54 15.13 15.54 15.60 16.54 15.87 15.87 15.38 15.38 15.60 15.86 15.86 16.54 16.02 15.38 16.14 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 10.15 8.35 8.35 8.02 8.35 8.06 8.35 7.23 9.63 10.15 10.15 7.48 10.15 7.23 9.41 9.41 9.63 8.68 7.21 8.34 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 15.10 16.48 16.48 15.49 16.48 15.38 16.48 17.07 14.90 15.10 15.10 15.38 15.38 17.07 17.89 17.89 14.90 17.58 15.38 15.49 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 15.61 13.03 13.03 15.10 13.03 13.76 13.03 11.49 11.54 15.61 15.61 11.54 11.54 11.49 20.94 20.94 11.54 12.20 11.54 13.17 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6.21 6.37 6.37 6.21 6.37 6.45 6.37 6.38 6.31 6.21 6.21 6.25 6.82 6.38 6.34 6.34 6.31 6.58 7.76 6.22 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 11.15 12.37 12.37 11.66 12.37 11.04 12.37 11.57 11.61 11.15 11.15 10.92 9.87 11.57 13.26 13.26 11.61 13.28 10.80 9.81 $ $ $ $ $ $ $ $ 454,500 140,000 153,902 95,999 190,000 80,000 124,900 191,600 $ $ $ $ $ $ $ $ 63.26 19.49 21.42 13.36 26.44 11.13 17.38 26.67 $ $ $ $ $ $ $ $ 696 570 577 537 673 570 650 644 $ $ $ $ $ $ $ $ 13.38 10.96 11.10 10.33 12.94 10.96 12.50 12.38 $ 17.55 $ 16.26 $ 21.88 $ 15.87 $ 21.88 $ 16.26 $ 18.82 $ 22.08 $ $ $ $ $ $ $ $ 16.02 16.54 15.33 16.30 18.24 16.54 16.14 16.21 $ $ $ $ $ $ $ $ 8.68 9.63 8.02 6.64 8.60 9.63 8.34 9.09 $ $ $ $ $ $ $ $ 17.58 14.90 15.49 15.77 16.91 14.90 15.49 17.27 $ $ $ $ $ $ $ $ 12.20 11.54 15.10 11.54 16.65 11.54 13.17 17.51 $ $ $ $ $ $ $ $ 6.58 6.31 6.21 6.35 6.31 6.31 6.22 6.34 $ $ $ $ $ $ $ $ 13.28 11.61 11.66 12.12 12.62 11.61 9.81 12.85 Affordability Calculation Assumptions: 30% of income is allocated to housing. For buying a house additional assumptions included 5% down payment, 6% interest rate at 30-years fixed, plus allocation of 21% of the monthly payments to property taxes, insurance and other costs such as PMI. * Most home prices are median, but a few are average prices. Some prices are for 2005, others are for 2004. ** Apartment Rents - HUD's 2005 Fair Market Rents. Rents shown are for 2-bedroom unit. Can afford to buy or rent. Data Source: Arizona Department of Housing, Arizona Department of Economic Security, U.S. Department of Housing and Urban Development, Arizona Real Estate Research Center at ASU, various local real estate associations, and local governments. Can afford to only rent. Cannot afford to buy or rent. 9 APPENDICES TABLE 2 Employment Growth and Housing Affordability by Industry ARIZONA Industry Median Hourly Wages Statewide 2004 Can Afford to Buy MedianPriced House Can Afford to Rent 2Bdrm Apartment 18.99 14.34 16.34 16.55 15.30 10.27 No No No No No No Yes Yes Yes Yes Yes No 9,600 173,600 201,700 76,600 95,900 268,100 9,000 200,900 176,300 77,700 96,500 300,900 -600 27,300 -25,400 1,100 600 32,800 Information (Publishing, motion pictures and videos, radio and TV stations and telecommunications) 53,900 45,900 -8,000 -14.8% $ 17.13 No Yes Educational Services (Businesses that provide educational services to schools, colleges and univrsities plus specialized schools, i.e., computer training, language schools, flight training and cosmetology) 28,300 41,200 12,900 45.6% $ 14.64 No Yes Health Care and Social Assistance Leisure and Hospitality Finance and Insurance Real Estate Rental and Leasing 191,600 230,000 109,300 44,100 229,100 250,400 120,500 45,000 37,500 20,400 11,200 900 19.6% 8.9% 10.2% 2.0% $ 13.29 $ 9.12 $ 16.11 $ 11.82 No No No No Yes No Yes No Professional and Business Services (Legal services, management services, computer services, accounting services, engineering services, payroll services) 319,900 342,500 22,600 7.1% $ 19.23 No Yes 84,700 89,100 4,400 5.2% $ 10.15 No No 377,800 2,265,100 414,300 2,439,300 36,500 174,200 9.7% $ 16.67 7.7% $ 12.85 No No Yes Yes Mining Construction Manufacturing Transportation, Warehousing and Utilities Wholesale Trade Retail Trade (Retail Store Workers) Other Services (Auto repair shops, barber shops, other repair shops) Government - Federal, State and Local (All government employees including teachers, police) Total Employment 10 Employment Employment 2001 2004 Employment Employment Change Change 2001-2004 2001-2004 Percent Numbers Data Source: Arizona Department of Housing and Arizona Department of Economic Security. -6.3% 15.7% -12.6% 1.4% 0.6% 12.2% $ $ $ $ $ $ APPENDICES TABLE 3 Employment Growth And Housing Affordability by Industry URBAN ARIZONA Industry Mining Construction Manufacturing Transportation, Warehousing and Utilities Wholesale Trade Retail Trade (Retail store workers) Information (Publishing, motion pictures and videos, radio and TV stations and telecommunications) Educational Services (Businesses that provide educational services to schools, colleges and univrsities plus specialized schools, i.e., computer training, language schools, flight training and cosmetology) Health Care and Social Assistance Leisure and Hospitality Finance and Insurance Real Estate Rental and Leasing Professional and Business Services (Legal services, management services, computer services, accounting services, engineering services, payroll services) Other Services (Auto repair shops, barber shops, other repair shops) Government - Federal, State and Local (All government employees including teachers, police) Total Employment Urban Employment 2001 Urban Urban Urban Employment Employment Employment Change Change 2004 2001-2004 2001-2004 Numbers Percent Median Hourly Wages Maricopa County (Urban Arizona) Can Afford to Buy Median Priced Home Can Afford to Rent 2 Bdrm Apartment 17.18 4,200 3,700 -500 -11.9% Yes 173,900 158,400 69,000 87,300 251,200 22,900 -27,800 1,200 300 26,300 15.2% -14.9% 1.8% 0.3% 11.7% $ $ $ $ $ $ No 151,000 186,200 67,800 87,000 224,900 14.94 16.59 16.74 16.03 10.65 No No No No No No Yes Yes Yes No 49,300 41,500 -7,800 -15.8% $ 17.51 No Yes 19,500 30,400 10,900 55.9% $ 14.98 No No 166,000 190,700 110,900 33,200 198,799 207,900 123,100 34,500 32,799 17,200 12,200 1,300 19.8% 9.0% 11.0% 3.9% $ 13.80 $ 9.18 $ 16.59 $ 12.72 No No No No No No Yes No 300,600 319,600 19,000 6.3% $ 19.85 No Yes 73,500 78,900 5,400 7.3% $ 10.35 No No 280,200 312,200 32,000 11.4% $ 18.11 No Yes 1,945,000 2,090,399 145,399 7.5% - - - Note: Maricopa County hourly wages by industry data was used as a substitute for the same category of data in the urban areas of Arizona. Data Source: Arizona Department of Housing and Arizona Department of Economic Security. 11 APPENDICES TABLE 4 Employment Growth and Housing Affordability by Industry RURAL ARIZONA Industry Mining Construction Manufacturing Transportation, Warehousing and Utilities Wholesale Trade Retail Trade (Retail store workers) Information (Publishing, motion pictures and videos, radio and TV stations and telecommunications) Educational Services (Businesses that provide educational services to schools, colleges and universities plus specialized schools, i.e., computer training, language schools, flight training, cosmetology) Health Care and Social Assistance Leisure and Hospitality Finance, Insurance, Real Estate Rental and Leasing Professional and Business Services (Legal services, management services, computers services, accounting services, engineering services, payroll services) Other Services (Auto repair shops, barber shops, other repair shops) Government - Federal, State and Local (All government employees including teachers, police) Total Employment Median Hourly Rural Rural Wages Rural Rural Employment Employment Mohave Employment Employment Change Change County (for 2001 2004 2001-2004 2001-2004 Rural Numbers Percent Arizona) 2004 Can Afford to Buy MedianPriced House (Kingman) Can Afford to Rent 2 Bdrm Apartment (Mohave 5,400 22,600 15,500 8,800 8,900 43,200 5,300 27,000 17,900 8,700 9,200 49,700 -100 4,400 2,400 -100 300 6,500 -1.9% 19.5% 15.5% -1.1% 3.4% 15.0% $ $ $ $ $ $ 14.74 12.88 11.82 14.60 12.05 10.03 No No No No No No Yes Yes No Yes No No 4,600 4,400 -200 -4.3% $ 13.07 No Yes 8,800 10,800 2,000 22.7% $ 13.74 No Yes 25,600 39,300 9,300 30,301 42,500 7,900 4,701 3,200 -1,400 18.4% $ 12.74 8.1% $ 7.98 -15.1% $ 12.02 No No No No No No 19,300 22,900 3,600 18.7% $ 15.70 No Yes 11,200 10,200 -1,000 -8.9% $ 8.67 No No 97,600 102,100 4,500 4.6% $ 14.00 No Yes 320,100 348,901 28,801 - - 9.0% - Note: Mohave County hourly wages by industry data was used as a substitute for the same category of data in the rural areas of Arizona. 12 County) Data Source: Arizona Department of Housing and Arizona Department of Economic Security. APPENDICES TABLE 5 Median Home Values and Household Income by Arizona Counties for Years 1990 through 2000 and 2000 through 2003 Median Household Income Median Home Value County 1990 2000 2003 Apache Cochise Coconino Gila Graham Greenlee La Paz Maricopa Mohave Navajo Pima Pinal Santa Cruz Yavapai Yuma $ 16,600 $ 59,700 $ 82,600 $ 58,600 $ 50,300 $ 40,700 $ 56,800 $ 84,700 $ 74,900 $ 51,500 $ 76,500 $ 53,400 $ 71,500 $ 85,300 $ 63,700 $ 41,700 $ 88,200 $ 142,500 $ 100,100 $ 80,900 $ 62,700 $ 86,500 $ 129,200 $ 95,300 $ 77,000 $ 114,600 $ 93,900 $ 94,700 $ 138,000 $ 85,100 $ 156,623 State of Arizona $ 79,700 $ 121,300 $ 146,124 $ 140,232 % Increase 19902000 % Increase 20002003 151.2% 47.7% 72.5% 70.8% 60.8% 54.1% 52.3% 52.5% 27.2% 49.5% 49.8% 75.8% 32.4% 61.8% 33.6% 21.2% 52.2% 20.5% 22.4% 1990 2000 2003 % Increase 19902000 % Increase 20002003 $ 14,100 $ 22,425 $ 26,112 $ 20,964 $ 18,455 $ 27,491 $ 16,555 $ 30,797 $ 24,002 $ 19,452 $ 25,401 $ 21,301 $ 22,066 $ 22,060 $ 23,635 $ 23,344 $ 32,105 $ 38,256 $ 30,917 $ 29,668 $ 39,384 $ 25,839 $ 45,358 $ 46,216 $ 31,521 $ 28,569 $ 36,758 $ 37,818 $ 35,856 $ 29,710 $ 34,901 $ 32,182 65.6% 43.2% 46.5% 47.5% 60.8% 43.3% 56.1% 47.3% 31.3% 46.9% 44.7% 68.3% 34.6% 58.2% 36.2% 1.9% $ 27,540 $ 40,558 $ 40,762 47.3% 0.5% 2.9% Home Values Increased Faster Than Income 1990-2000 Home Values Increased Faster Than Income 2000-2003 % % 85.6% 4.6% 26.0% 23.3% 0.1% 10.8% -3.8% 5.3% -4.1% 2.6% 5.1% 7.5% -2.2% 3.6% -2.6% 19.3% 4.9% 20.0% 19.5% Note: The American Community Survey data was available only for Arizona, Maricopa County and Pima County and was used for the 2003 median household income numbers. For Maricopa County, the upper bound estimate was used; for Pima County and Arizona the mid-point estimates were selected. Data Source: Arizona Department of Housing and U.S. Census Bureau - 1990 and 2000 Censuses. 13 2005 GOVERNOR’S AFFORDABLE HOUSING FORUM SPONSORS Ak-Chin Indian Community Arizona Realtors® Housing Needs Foundation Boston Capital Foundation for Senior Living RBC Dain Rauscher Ruiz Investment Group, LLC SOURCES Arizona Department of Housing Arizona Department of Economic Security Arizona Real Estate Research Center at ASU National Association of Homebuilders National Association of REALTORS® Office of Federal Housing Enterprise Oversight U.S. Census Bureau U.S. Department of Housing and Urban Development Arizona Department of Housing 1700 W. Washington, Suite 210 Phoenix, AZ 85007 (602) 771-1000 www.housingaz.com Title II of the Americans with Disabilities Act prohibits discrimination on the basis of disability in the programs of a public agency. Individuals with disabilities who need the information contained in this publication in an alternate format may contact the Arizona Department of Housing at (602) 771-1000 or our TDD number (602) 771-1001 to make their needs known. Requests should be made as soon as possible to allow sufficient time to arrange for the accommodation. The goal of the Arizona Department of Housing is to alleviate many of the issues raised in this document through strategic public investment and technical assistance. If you would like additional information, please contact: Dr. Sheila Harris, Director Jeff Gray, Community and Government Relations Administrator (602) 771-1011 jeffg@housingaz.com 8/2005