Luxury housing values skyrocket as consumer desires eclipse 20th Century staples

The picturesque Paradise Valley landscape where land values are nearly three times higher than anywhere else in the Phoenix metropolitan area. (Independent Newsmedia/Josh Martinez)

Numbers suggest, and experts agree, spring 2019 could be a baseline of boom years to come as the sales of million dollar homes in the Town of Paradise Valley continue to realize significant gains in average sale price, sales volume and price per square foot.

The average price per square foot for a home found within the municipal bounds of the Town of Paradise Valley in calendar year 2014 was $305.37; meanwhile, today, the price per square foot reported in 2018 was $381.77, according to data available at the Multiple Listings Service.

Data provided by The Karas Group of Launch Real Estate illustrates Paradise Valley land is nearly three times more valuable than surrounding tracts throughout Maricopa and Pinal counties.

The Karas Group officials contend record sales numbers continue to define the local luxury real estate market. (Independent Newsmedia/Josh Martinez)

Conversely, MLS data shows the average price per square foot throughout the Phoenix metropolitan region in 2014 was $125.90 and grew to $158.62 in calendar year 2018.

But while local real estate experts are hesitant to say good times are here to stay, they will tell you new sales records continue to be defined and new home builders can’t get dwelling structures built fast enough.

However, the luxury sales game — typically considered any single-family property with a valuation over $700,000 — is dealing with a generational shift of clientele driving a wedge between new build and established property, which continues to propel a buyer’s market.

But one luxury home builder, Rod Cullum of Cullum Homes, contends the millennial population and the baby boomer generation are creating a new kind of desire in the luxury real estate world, which is pulling prices per square foot up and pushing the value of established estates down.

The bottom line: New builds are en vogue and the millennial millionaire is looking for half the square footage coupled with the best residential amenities money can buy.

The homebuilder

“You have three slices in the market,” Mr. Cullum said of the baby boomer looking to have luxury experiences in smaller square feet, the young family looking for space and the amenities the new millennial millionaire desires.

Kim and Rod Cullum at Cullum Homes’ Scottsdale headquarters. (File photo)

“The look of the house may have changed but the function of the rooms have remained pretty static. That desire in Paradise Valley has been pretty steady. The next slice of buyer that is unique and new is the empty nester buyer. The other buyers we are seeing are new millennial buyers, who are seeking the bigger, blingy houses that are super contemporary.”

But no matter the floor plan, the volume of sales in the Town of Paradise Valley is soaring.

Numbers show in calendar year 2014 the cash value of real estate changing hands was $627,833,774 and since that time nearly a billion in volume sales was recorded in 2018 with the final number resting at $928,423,123.

Furthermore, there were 398 single-family home sales in 2014 and in 2018 that number rose to 471, data shows.

But a trend emerging in luxury real estate: Enormous Mediterranean-style mansions hovering between 8,000- and 12,000-square-feet have lost their luster.

The luxury buyer of today is looking for sleek, trendy and technologically advanced dwellings oftentimes with movable walls and tricked-out amenities.

The 21st Century luxury home as envisioned by Cullum Homes. (File photo)

“The reality of the situation is that when you do these smaller, niche homes you have fixed costs. You have land costs, you have cabinet costs, technology costs and plumbing costs, but the number of the rooms doesn’t really change,” Mr. Cullum said. “The market hasn’t quite adjusted to that yet.”

Mr. Cullum explains amenity costs — things like kitchen appliances, specialized water delivery and smart home installations — are relative despite the total square footage.

“The fixed amenities you have on the same 4,000-square-foot home are almost identical to an 8,000-square-foot home,” he explained. “There is some growing angst on that regarding price per square foot, especially from the agents. But that is just a math issue and over time the market will educate itself.”

Scottsdale-based homebuilder Cullum Homes was named the 2019 “Custom Home Builder of the Year” by the National Association of Home Builders Custom Home Builders Committee.

When asked if spring 2019 will be viewed in years to come as the “good times,” Mr. Cullum replied, “Absolutely not. 100 percent not. We did 22,000 homes last year in Maricopa County and any expert you talk to says that is 8,000 to 10,000 homes too few to meet the demand.”

Mr. Cullum contends the good times are just beginning in the Phoenix metropolitan area housing market.

“Until we start hitting 30,000 homes a year we are not going to see a slow down,” he said. “Right now, I think we are at the bottom of the market.”

The Walt Danley Web Development Team. (Submitted photo)

Top line sales

Two representatives of established luxury real estate brands — Mr. Karas of The Karas Group and Dub Dellis of the Walt Danley Christie’s International Real Estate firm — say new sales records are being set nearly every fiscal quarter.

“I think over the last five years people have really started to use that term, ‘price per square foot,’” Mr. Karas said of the evolution of consumer education. “There are so many factors that go into it — no home is created equal.”

For Mr. Karas, he is realizing a new normal.

“We are doing excellent right now,” he pointed out. “We are seeing a nice influx of out-of-state buyers and buyers who are either upgrading or downsizing. And, the amount of new home permits are at an all-time high.”

Chris Karas

Mr. Karas points out sales are booming in the Town of Paradise Valley.

“A lot of our homeowners are reinvesting in the community and it’s tremendous for us,” he said. “Our price per square foot has gone up tremendously over the last few years. We have had more of the high-end, the ultra-high end — $10 million plus — sales in the last three months than in the last year.”

But Mr. Karas confirms new home builds are all the rage while homes just 10 years old in the luxury housing market are viewed as outdated.

“Our style has changed tremendously over the last 10-plus years or so,” he said. “We are seeing those early 2000 homes not performing well, which is just due to the demand. A lot of those homes built then are 8,000 to 10,000-square-feet even though they are asking for the higher end of the market. The Mediterranean-themed homes are not sought after right now.”

But homes in the consumer’s gaze are moving quickly, Mr. Karas says.

“We have had two $10 million homes close in Paradise Valley since Jan. 1 and another $10 million home very soon — that has never been done,” he explained.

“On top of that, we have had eight homes between $5 (million) and $7 million this year, which is amazing and we have another seven between $5 (million) and $10 million under contract. That illustrates a really healthy, high-end market, which is nothing we have experienced before.”

For Mr. Dellis, and Walt Danley Christie’s International Realty, the iron is hot.

“We made a decision 18 months ago and while we have always done business in north Scottsdale, we decided it was time to have a brick-and-mortar footprint,” he said of recent expansions into the northern regions of Scottsdale.

As Walt Danley Realty embarks upon a physical footprint in north Scottsdale — the group now has an office in the DC Ranch area — Mr. Dellis says the idea of smaller, beautifully finished homes is catching fire.

But the other side of that coin, is the sprawling mansions of the early 2000s has become a relic of the 20th Century.

“It certainly can be,” Mr. Dellis said of the notion spring 2019 is the baseline of good things to come. “We have had the most active $3 million market price point.”

Mr. Dellis points out the northeast Valley housing market has — in the first fiscal quarter of 2019 alone — sold 46 properties priced at $3 million or better.

Comparably, Mr. Dellis explains, the Phoenix metropolitan area marketplace saw 37 properties of similar stature sold during this same time last year.

“Inventory is at an all-time high,” he said of the north Scottsdale luxury market. “We continue to break our own sales records — but people are not as attracted to the 12,000-square-foot cavernous homes anymore. Smaller footprint, but highly upgraded is really sought after here.”

Luxury real estate experts say the next five years will continue to be strong for all levels of real estate, but in particular, the 4,000-square-foot luxury home with all the trimmings. (Independent Newsmedia/Josh Martinez)

Independent Newsmedia Arizona Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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