Arizona Real Estate Notebook

9 responses so far ↓

• 1 Jackson // Dec 29, 2007 at 11:58 am

  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…

• 2 Brian McMorris // Apr 2, 2008 at 9:42 am

  I notice that the north Scottsdale sellers are not getting the word that the national market is in a severe correction. The inventory is skyrocketing because sellers in this zip are refusing to change their expectations / accept a lower price. But I predict this will change. Even though N. Scottsdale is very desirable, that is already in the price differential. People who need to sell will have to get realistic. People who are buying just got their clocks cleaned elsewhere, if they have sold, or know they should expect a reduction in price, if they did not have to sell an existing home.

• 3 John Wake - Real Estate // Apr 2, 2008 at 11:09 am

  “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.

• 4 Brian McMorris // Apr 20, 2008 at 12:30 pm

  Looking at the inventory numbers and the average days on market charts, it looks like many of these people will be sitting on that 3rd house a whole lot longer.

  (don’t you think a few of the people in that zip code are just a little stretched?)

• 5 Peter Fork // Apr 21, 2008 at 7:45 am

  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.”

• 6 John Wake - Real Estate // Apr 21, 2008 at 8:32 am

  My guess is that prices will come down less in the luxury zip codes (on a percentage basis) and that they will come down more slowly than elsewhere.

• 7 Brian McMorris // Apr 21, 2008 at 4:32 pm

  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.

• 8 Bud Fox // Jul 25, 2008 at 8:41 am

  Per Merrill Lynch, jumbo loan rates have risen to (an average rate of) 7.84%- an 8-year high.

  Every basis point higher equates to hundred of dollars in depreciation in values in N. Scottsdale. And lets not pretend that everyone up there is a second home owner. Most have families and are in the real estate business. Many bought at or near the peak of the market and those who didn’t cashed out their equity to buy an Escalade.

  The area is in deep, deep trouble- just like the rest of the valley.

• 9 Bud Fox // Jul 25, 2008 at 8:51 am

  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.

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