85255 Scottsdale real estate notebook

The trend looks like the beginning of a pricing train wreck. The rate of inventory is growing too quickly and sellers need to react by lowering prices 10-15% or they are going to be sitting around for another year always coming down in price behind the market clearing price. My guess - 25% below where the market currently sit. Hard reality to swallow…

“People who need to sell…”

That’s why prices haven’t moved much. A ton fewer people need to sell in 85255 compared to areas on the periphery with a lot of first time home buyers who can’t handle any bad financial news.

Many of these sellers can and will wait for years to get their price because they don’t need the money.

In the meantime, they’ll enjoy using this third home of their’s in the winter.

Sure some people really need to sell but they are much fewer than on the periphery which brings a totally different dynamic to the market.

Where the periphery may adjust completely this year, some areas like 85255 MIGHT adjust slowing for years.

For most of the home owners in 85255, a home is for enjoying life, it’s not so much an investment because they already are financially secure.

In these areas, buyers have to find the right seller not the right house if they want a great price.

Is it possible that in the next few months we see in 85255 the same phenomenon we are seeing right now in Florida?
http://globeinvestor.com/servlet/story/RTGAM.20080421.wfloridacondos0421/GIStory/

“After the local real estate market peaked two years ago, local brokers said high-end real estate was the only thing propping up the condo market in Miami, one of the most overbuilt and overpriced in the United States.(…) “The high end is resilient,” Mr. Roffers said. “Certainly the market has corrected since the peak of 2005. What we are seeing is that quality waterfront inventory is holding value.”
But many properties were quickly pulled from the auction when no one bid. And bargain hunters had an open field.
One man, in short order, snapped up two bay front houses in Miami Beach’s pricey Venetian Islands, one for $500,000 and the other for $1-million. The homes sold for $2.75 million and $2 million respectively in mid-2005, according to county records.”

Mathematically, that argument does not work. The premium is already in the luxury home addresses. Scottsdale / Pardise Valley has been THE address in the Valley for 50 years. What has happened in the Valley in the past 10 years that there should be a greater premium now? As the lower priced zips decline, so too must the higher priced zips by a similar percentage, though the timing can vary.

Unless they just put a seashore somewhere near Carefree, there is no good reason that the Scottsdale zips should have a higher premium now than in 2005. They will not hold their price any more so than other zips in the Valley.

In other words, to service the debt on a $600k house at 7.84% (assuming a 15% down payment and a 35% debt service to income rate) the household would have to earn roughly $130k a year.

The average household income in N. Scottsdale is something like $95k / year. Needless to say, unless these people are all trust-funders, we are going to see values drop off a cliff.

I used to live in this zipcode. PLENTY of people here are faking it, living large on 40k a year… Option Arms and alt A lending is rampant up here, this zipcode will implode and die!

FHA loans will not be available above 271K in the near future, removing a few of the remaining very few buyers in this price point.

John Wake has a great wedbsite, but is dead wrong on this predicition, north scottsdale prices are going into freefall this time around. 50% off from peak, you can count on it.

I disagree that ANY zips will bottom out soon. Job losses are piling up, foreclosures are still clbimbing, and these effect have not reacher their zenith yet. Even places on the periphery were prices have dropped below builders costs are not finished. Here is why: a couple months ago, the only place you could get a livable home for 120k was maricopa, queen creak, goodyear etc. those prices now or shortly will be available in mesa, chanlder, gilbert, giving the low price buyer a choice, and killing the periphery again.

north scottsdale has merely started their downward trend, when i lived in mcdowell mountain ranch, every other neighbor was a realtor, loan officer, title agent. Good luck keeping that market together! My home doubled in just over three years, i sold out, took the cash and moved into my former tempe rental. I’ll buy again at the bottom, but given everything I see, we are no where near the bottom yet.

It’s 09. Where has the interesting dialogue from John & Roberto gone?
What zip codes have hit bottom?
Which zip codes have stabilized?
Do tell.

How much further does this zip code have to go? it seems like tons of 1 million dollar plus homes come on the market. are they really enough buyers out there to prevent prices from going down another 20%?
John, your latest take was 6 months ago. Any updates since then?