All is quiet on the Phoenix housing front.
The latest housing report generated from the Center for Real Estate Theory and Practice at the W. P. Carey School of Business shows continual price increases, a typical seasonal drop in sales activity and a significant decrease in distressed property transactions.
The real estate snapshot shows the median sales price of single-family homes is up 4.4 percent — from $212,600 to $221,859 — year to date, while average price per square foot gained 4 percent from 125.04 to $129,859, a report synopsis states.
While overall sales of single-family and multifamily housing options were 14 percent better than this time last year, that number fell a sharp 11 percent from July to August this year, according to Mike Orr, director of the Center for Real Estate Theory and Practice.
“(Sales) are actually drifting down over the past couple of three months, but still quite a ways up over where they were last year,” he said in an Oct. 7 podcast. “This drifting down happens pretty much every summer.”
The numbers show single-family home sales increase year over year in five sectors:
- Re-sales — up 18 percent;
- New homes — up 14 percent;
- Investor flips up 7 percent;
- Third-party purchases at trustee sale — up 10 percent;
- HUD sales — up 30 percent.
Conversely, the numbers show single-family home sales decreased over three sectors:
- Short sales and pre-foreclosures — down 6 percent
- Bank-owned homes — down 27 percent;
- GSE-(Fannie Mae, Freddie Mac, etc.) owned homes — down 68 percent.
The distressed property supply is down 46 percent year to date.
The good news for Scottsdale and the Town of Paradise Valley: The second quarter of this year was the best one for the luxury housing market — those homes that sell above $700,000 — in 15 years, according to the report.
“There’s always a strong second quarter for the luxury homes. In fact, this second quarter in terms of dollars spent on homes over a million dollars in the inner areas like Paradise Valley, Biltmore and Arcadia, has been the best year in 15 years,” he said.
“It’s even higher than during the bubble when expressed in dollars rather than units. So it was a really good spring but just as the stock market started losing some steam in the third quarter it started worrying people particularly in August. That doesn’t affect the housing market as a whole, but it affects the luxury housing market.”
But supply and demand continues to play a major role in the lower housing price points, Mr. Orr points out.
“What’s happening below that, at the bottom end, is low volume because there’s not enough supply and the lack of supply has meant that even with relatively weak demand; prices have gone up quite strongly there,” he explained. “So you’re seeing a 10 percent increase at the bottom end, not very much elsewhere but the overall average is about four or five percent, on an annual basis.
Supply and demand
The local housing market continues to be the dominate storyline as Scottsdale reflects a microcosm of the greater Phoenix marketplace.
In Scottsdale, fewer homes were listed in the month of September, which appears to be pushing upward pressure on average listing price, according to a September market report provided by the Scottsdale Area Association of Realtors.
There were 15,443 active listings within Scottsdale city limits in September compared to August’s total of 16,198. In September 2014 there were 22,853 active listings in Scottsdale, the report states.
The average listing price for a Scottsdale dwelling in August was $497,000 while the average listing price in September increased to $521,000, the report states.
While data often drives decisions, one longtime Scottsdale Realtor says for the average home buyer he or she are dealing with the here and now.
“I don’t pay great attention to it as it seldom has relevance for individual clientele,” said Gary Shapiro, a Realtor with Coldwell Banker Residential Brokerage, on the topic of data reports.
“When they are in the market, they have to deal on a day-to-day basis with choices they have whether there is a trend line or not. They are pretty much powerless to change those things that are beyond their scope.”
Mr. Shapiro says the Valley of the Sun has not lost its luster or its allure.
“Fundamentally, I think the market is still driven by the fact that we are living in a place that is coveted by many people,” he said in an Oct. 13 phone interview. “We look pretty good despite negative press or research for a point an economist might be making — buyers pretty much flock here given the opportunity.”
Mr. Shapiro says the marketplace has changed over the years and the role of Realtor has evolved as well.
“We never dreamed of bubbles — we didn’t have foreclosures, it just didn’t occur,” he said of the Golden Years of Arizona real estate. “Those of us who are still standing, we have changed to really focus on giving advice to people. It’s just the picture has changed.”
With historically low interest rates, Mr. Shapiro believes now is the time to buy.
“Five, 10 and 12 years from now on a longer scale, macro level, all of us who didn’t buy will be saying, ‘I should have done it. Why didn’t I do it?’” he said. “That is why I resist labels; I resist the statistics. I am a much bigger listener, advocate and counselor to those we serve.”
Central Phoenix corridor
Cionne McCarthy of Russ Lyon Sotheby’s International Realty says the central Phoenix corridor is the hottest of all the local markets in the metropolitan area.
“My clientele is the luxury market, I sold two estate homes on the Biltmore Circle this year,” she said in an Oct. 13 phone interview. “It had been a very, very slow area in years prior. The buyers were local people who felt the prices were the lowest in the Biltmore they would be.”
The resurgence of downtown Phoenix is fueling the interest of central Phoenix real estate, Ms. McCarthy contends.
“The trend I am seeing is that families are purchasing along the central corridor because it is close to private schools,” she pointed out. “There is a part of the central corridor that holds great appeal from Seventh Avenue to Seventh Street. The other area of Phoenix that is just hot as a pancake is the Camelback corridor.”
Ms. McCarthy says price point is locking some out of a coveted Arcadia address.
“It is the perfect alternative to Arcadia where the cost of real estate has increased so much it is tough to get in,” she said of the central Phoenix area.
Affordability continues to be a mainstay of the Phoenix metropolitan housing market, Ms. McCarthy contends.
“It feels like people are now hoping to buy a house and own a property because interest rates are so low. The value is there,” she said. “The affordability of Phoenix compared to most cities is still really good. It is a great time for buyers to see what they can get.”
The luxury angle
When most people think of luxury real estate, one place comes to mind in the Phoenix metropolitan area: The Town of Paradise Valley.
“The major trend we saw in the third quarter was a lack of activity above $1.5 million,” said Walt Danley, president of Walt Danley Realty. “The first two quarters of 2015 were very strong — much stronger than 2014. While the third quarter of the year is always the slowest for the luxury market, it is much slower than we had anticipated.”
Every industry has its peaks and valleys, but according to Mr. Danley, this year’s highs and lows for the luxury-home market are extreme.
“Sales have continued to be strong between $500,000 and $1 million, but they have been very disappointing in the higher price ranges,” he explained.
“September sales over $500,000 in the northeast Valley were up 40 percent over last year. However, almost all the strength was concentrated in the range between $600,000 and $1 million, where sales were up 82 percent. Sales over $1.5 million were down 34 percent compared to September of 2014 and sales over $3 million plummeted from nine to two.”
As the emerging bear market continues to leave its tracks on Wall Street, the emotional hangover is leaving luxury real estate with minimal gains, Mr. Danley says.
“The main culprit appears to be the dismal performance of the global financial markets, which just had their worst quarter since 2011,” he said. “Buyers in the upper price ranges are hesitant to move forward with a purchase when the financial markets show volatility.”
Chris Karas of The Karas Group at Russ Lyon Sotheby’s International Realty confirms the lower end of the luxury market is dominating sales activity.
“Typically, what we experience in the third quarter, everything slows down. We saw a slowdown in the higher-end market,” he said in an Oct. 13 phone interview. There were a number of sales in the $2 to $3 million range, but that middle range price point was definitely very active. The slowdown is due to lack of inventory and that translates to less sales as well.”
As new inventory is being added to the marketplace as the typically busy winter season approaches, Mr. Karas says new buyer desires are being realized.
“Overall, we will see a big influx of properties and we have personally launched almost a dozen properties in the last two weeks,” he pointed out. “The biggest trend we are seeing right now are clients looking for very specific layouts for properties. We are seeing a trend more to more clean-line homes and a little bit more of the contemporary feel.”
Mr. Karas says his firm is gearing up for an active Paradise Valley winter season.
“We see Paradise Valley as being undervalued and a promising fourth quarter is likely,” he said. “I think for one of the first times in a long time there has just been a large amount of demand. Arcadia has been the buzz. We have also seen a lot of new construction in Arcadia. Overall there has been some large demand and that has driven land values.”
North Valley News Editor Terrance Thornton can be contacted at 623-445-2774 or at firstname.lastname@example.org