Properties
MARKET UPDATE DEC 2013

PARADISE VALLEY

QUARTERLY SALES UP 22% IN OCTOBER

Luxury market has its best year since 2006

PRESENTED BY THE KARAS GROUP

The luxury home market’s recovery has been impressive during the first ten months of 2013. Although the recovery started later than the rest of the market, 2013 has been the best year for luxury home sales since 2006. Late summer and fall are usually much quieter than the spring but this year we saw sales grow 22% over last year with average prices up 9% and average price per square foot up 7%. When we examine luxury home sales in Paradise Valley that closed between August and October, there are several dramatic changes we can see comparing 2013 with the two prior years:

We see far fewer distressed property sales

  • 50% drop in properties bought at trustee sale compared with 2011
  • 70% drop in lender owned homes compared with 2011
  • 50% drop in pre-foreclosure sales compared with 2011
  • 100% drop in short sales compared with 2011
  • 67% increase in investor flip sales compared with 2011

We now have far more normal transactions

  • normal sales up from 51 in 2011 to 58 in 2012 and 79 in 2013
  • new construction up from 2 in 2011 to 4 in 2012 but only 1 in 2013
  • investor flips up from 3 in 2011 to 4 in 2012 and 5 in 2013

The fall in distressed sales means they are no longer having much impact on the average sales price which has increased from $1.446m to $1.577m between 2012 and 2013. The average square feet of living space increased by 3%, so the average price per square foot has increased by 6%. Though less than we measured during the spring, this is still a significant change in a single year when inflation is running at an annual rate under 2%. However we must remember that the market is bouncing back from a severe over-correction following the bursting of the housing bubble and price increases may moderate going forward.

PARADISE VALLEY SINGLE FAMILY HOMES – AUG – OCT, 2013

AVERAGE

AVERAGE

NUMBER

AVERAGE

AVG DAYS

ACTIVE

MONTHS OF

SALE PRICE

PRICE / SQ FT

OF SALES

SQ FT

ON MARKET

LISTINGS

SUPPLY

2012

$1,446,459

$322.99

79

4,478

191

254

9.6

Change

+9%

+6%

+22%

+3%

-12%

+10%

-10%

2013

$1,577,076

$341.88

96

4,599

168

279

8.7

We note that the average number of days on market for closed sales has dropped by 23 days compared with last year. We can also see that the improving market has brought out more sellers. Although we have seen a 10% increase in active listings this represents only 8.7 months of supply because the sales rate has increase by 22%, considerably more than the increase in active listings. 8.7 months of supply is a relatively low reading for Paradise Valley, implying a healthy market, although this is an increase over the 8.1 we measured last month.

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

Aug-Oct 2013

Average $/SF

Aug-Oct 2012

Annual

Change

Up to $1m

$239.82

$257.11

-6.7%

$1m to $1.5m

$307.55

$280.40

+9.7%

$1.5m to $2m

$355.94

$343.78

+3.5%

$2m to $3m

$354.69

$418.22

-15.2%

Over $3m

$616.84

$443.93

+38.9%

We note that the weakest price range was between $2 million and $3 million, but homes over $3 million did much better in 2013 compared with 2012. In some cases this is because they were smaller, older homes sitting on spectacular, mountain-side lots. These sometimes achieve a price per square foot of over $1,000. Occasionally the home is demolished to make way for something newer and much larger. There were 5 sales over $3 million in Aug-Oct 2013 and 4 in Aug-Oct 2012. The third quarter is usually a quiet period for sales of homes and indeed all but 3 of these 9 sales occurred in October.

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 about 21% since December 2011.

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

Subdivision

Address

Sale Price

Sq. Ft.

$/Sq. Ft.

Built

Lot Size

Camelback Ranchos 6101 N 51st Pl

$3,150,000

6,282

$501

2011

41,839

Mummy Mountain Estates 5747 E Mockingbird Ln

$4,070,000

3,274

$1,243

1951

213,765

Judson 6617 E Cactus Wren Rd

$4,613,067

8.638

$534

2005

56,047

Palo Verde Foothills 6216 N 38th Pl

$4,900,000

11,097

$442

2006

59,551

Tilyou Ranchito 6240 N 59th Pl

$9,200,000

12,751

$722

2006

96,986

For some time after the housing crash, jumbo home loans were scarce, but they are now more freely available to well qualified borrowers. For the first time in living memory, the interest rates on these jumbo loans are sometimes lower than for conventional loans. The increased availability of jumbo loans, together with the very attractive pricing of Paradise Valley compared with other luxury areas outside Arizona, is helping to offset a general decline in housing demand since July.

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

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