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In
order to most accurately determine prior market price cycles one must remove the effects of inflation and look at real historical prices. The past thirty years have seen three real price cycles and the beginning of a sixth in Phoenix. Each market cycle has
involved nominal price growth. Market cycle time periods have varied from a market downturn of thirteen years to the prior market growth cycle of thirteen years.
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|
Time
Period |
Real
Price History |
Real
Price Change |
Nominal
Price History |
Nominal
Price Change |
1977:Q2
- 1979:Q4 |
$124,500
- $158,100 |
27.0% |
$38,700
- $60,400 |
56.0% |
1979:Q4
- 1993:Q1 |
$158,100
- $118,500 |
-25.0% |
$60,400
- $83,000 |
37.4% |
1993:Q1
- 2006:Q3 |
$118,500
- $267,400 |
125.6% |
$83,000
- $266,500 |
221.3% |
2006:Q3
- 2006:Q4 |
$267,400
- $262,200 |
-2.0% |
$266,500
- $262,200 |
-1.6% |
The
mortgage-debt-to-income ratio is commonly viewed as the most accurate method of determining market cycles. The past thirty years have seen three cycles and the beginning of a fourth, all of which included large changes in home affordability. The peak in 1981 is an abnormality due to all time high mortgage rates. It does however act as the turning point of a 12 year improvement in Phoenix home affordability. Due to this abnormality of the late 1970s and early 1980s, the median affordability ratio is skewed. Consequently, despite the fact that home affordability is only marginally above the median, today’s Phoenix home prices have a high mortgage rate fluctuation risk.
|
Time
Period |
Phoenix
Mortgage-Debt-to-Income Ratio |
Phoenix
Ratio Change |
National
Mortgage-Debt-to-Income Ratio |
National
Ratio Change |
1977:Q2
- 1981:Q4 |
19.3%
- 42.0% |
117.0% |
20.7%
- 39.2% |
89.1% |
1981:Q4
- 1993:Q3 |
42.0%
- 14.4% |
-65.7% |
39.2%
- 17.6% |
-55.1% |
1993:Q3
- 2006:Q2 |
14.4%
- 27.6% |
91.4% |
17.6%
- 23.5% |
33.7% |
2006:Q2
- 2006:Q4 |
27.6%
- 25.8% |
-6.6% |
23.5%
- 21.7% |
-7.5% |
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