Paradise Valley Market Update September 2013

PARADISE VALLEY

AVERAGE SALES PRICE UP 34% FROM SUMMER 2012

Luxury market recovering from the housing crash

PRESENTED BY THE KARAS GROUP

 The last eighteen months have seen a strong turnaround for the housing market in the Greater Phoenix area. At first the luxury market’s recovery was relatively hesitant compared with the rest of the market, but during the first seven months of 2013 it has really found its stride. When we examine luxury home sales in Paradise Valley that closed between May and July, there are several dramatic changes we can see comparing 2013 with the two prior years:
We see far fewer distressed property sales

  • 83% drop in properties bought at trustee sale compared with 2011
  • 83% drop in lender owned homes compared with 2011
  • 86% drop in pre-foreclosure sales compared with 2011
  • 63% drop in short sales compared with 2011
  • 25% drop in investor flip sales compared with 2011

We now have far more normal transactions

  • normal sales up 23% compared with 2011
  • new construction up 100%

The rapid fall in distressed sales has had a significant impact on the average sales price. An increase of 34% from $1.352m to $1.81m between 2012 and 2013 is obviously dramatic and somewhat over-states the increase in home values, because the average square feet of living space also increased by 6%. If we look instead at the average price per square foot this has increased by 23%. This is still an exceptional change in a single year but we must remember that the market is bouncing back from a severe over-correction following the bursting of the housing bubble.

PARADISE VALLEY SINGLE FAMILY HOMES – MAY – JUL, 2013    

AVERAGE

AVERAGE

NUMBER

AVERAGE

AVG DAYS

ACTIVE

MONTHS OF

SALE PRICE

PRICE / SQ FT

OF SALES

SQ FT

ON MARKET

LISTINGS

SUPPLY

2012

$1,348,954

$300.60

105

4,587

176

253

7.2

Change

+34%

+23%

+10%

+6%

+0%

-1%

-10%

2013

$1,811,730

$370.93

116

4,884

176

251

6.5

 

We note that the average number of days on market for closed sales is unchanged from last year. We can also see that the improving market has seen a 10% increase in transactions although there has been little change in the number of active listings, comparing August 1, 2012 with August 1, 2013.
As in most areas, the average price per square foot in Paradise Valley tends to increase as we move up the price scale.

PRICE RANGE

Average $/SF

May-Jul 2013

Average $/SF

May-Jul 2012

Annual

Change

Up to $1m

$253.35

$228.19

+11.0%

$1m to $1.5m

$292.54

$264.97

+10.4%

$1.5m to $2m

$361.41

$351.34

+2.9%

$2m to $3m

$386.55

$367.92

+5.1%

Over $3m

$571.22

$376.45

+51.7%

We note that the weakest price range is between $1.5 million and $2 million, but homes over $3 million did much better in 2013 compared with 2012. There were also 10 of these sales over $3 million in May-Jul 2013 and only 3 in May-Jul 2012.

Looking back over the long term annual average price per square foot we can see that prices in Paradise Valley peaked in 2008 and fell by about 43% before recovering. The annual average $/SF is now catching up to the more volatile short term averages but has already improved by over 18% since 2012.

There were a number of significant sales that closed in the period from May to July 2013 including:

Subdivision

Address

Sale Price

Sq. Ft.

$/Sq.Ft.

Built

Lot Size

Las Brisas 5514 E Road Runner Rd

$5,900,000

8,369

$705

1996

99,210

Mummy Mtn Park 5880 E Foothill Dr

$6,100,000

8,726

$699

2001

83,835

Jokake Camelback Properties 5540 N Saguaro Rd

$8,000,000

11,963

$669

1998

209,128

Kerr Estates 5012 E Mockingbird Ln

$5,500.000

8,644

$636

1966

73,812

Nauni Valley Ranch 5625 E Nauni Valley Rd

$7,600,000

15,436

$492

2005

96,884

For some time after the housing crash, jumbo home loans were extremely rare, but they are now becoming more freely available to well qualified borrowers. Although higher mortgage interest rates will have a negative effect on affordability,  the increased availability of loans is likely to more than compensate for that and lead to a continued increase in demand. The renewed confidence in the housing market and the very attractive pricing of Paradise Valley compared with other luxury areas outside Arizona means we are likely to see demand grow over the next several years.

Date prepared by Mike Orr, Founder of the Cromford Report and Director of the Center for Real Estate Theory and Practice, W P Carey School of Business, ASU.

Information contained in this report has been prepared exclusively for The Karas Group. All other use is expressly forbidden. The Karas Group © 2013