Properties
MARKET UPDATE OCT 2013

PARADISE VALLEY

SALES UP 13% FROM SUMMER 2012

Luxury market continues to recover from the housing crash

PRESENTED BY THE KARAS GROUP

 The last two years 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 eight months of 2013 it has really found its stride. When we examine luxury home sales in Paradise Valley that closed between June and August, there are several dramatic changes we can see comparing 2013 with the two prior years:

We see far fewer distressed property sales

  • 75% drop in properties bought at trustee sale compared with 2011
  • 83% drop in lender owned homes compared with 2011
  • 77% drop in pre-foreclosure sales compared with 2011
  • 56% 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 19% compared with 2011
  • new construction up from 0 in 2011 to 3 in 2012 and 2 in 2013

The fall in distressed sales has had a positive impact on the average sales price. This was offset by an 8% fall in the average size of homes that sold in the summer of 2013 versus 2012. An increase of 1% from $1.480m to $1.488m between 2012 and 2013 under-states  the increase in home values, because the average square feet of living space decreased by 8%. If we look instead at the average price per square foot this has increased by 9%. 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 of 2% or less. However 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 – JUN – AUG, 2013

AVERAGE

AVERAGE

NUMBER

AVERAGE

AVG DAYS

ACTIVE

MONTHS OF

SALE PRICE

PRICE / SQ FT

OF SALES

SQ FT

ON MARKET

LISTINGS

SUPPLY

2012

$1,479,947

$310.16

86

4,772

162

251

8.8

Change

+1%

+9%

+13%

-8%

-2%

-2%

-13%

2013

$1,488,027

$337.91

97

4,392

158

245

7.6

We note that the average number of days on market for closed sales has dropped by 4 days compared with last year. We can also see that the improving market has seen a 13% increase in sales transactions although there has been only a modest 2% decline in the number of active listings, comparing September 1, 2012 with September 1, 2013. 7.6 months of supply is a relatively low reading for Paradise Valley, implying a healthy market..

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

Jun-Aug 2013

Average $/SF

Jun-Aug 2012

Annual

Change

Up to $1m

$242.39

$228.28

+6.2%

$1m to $1.5m

$307.75

$273.47

+12.5%

$1.5m to $2m

$367.02

$343.82

+6.7%

$2m to $3m

$387.20

$362.27

+6.9%

Over $3m

$462.44

$384.41

+20.3%

We note that the weakest price range is between $0.5 million and $1 million, but homes over $3 million did much better in 2013 compared with 2012. There were 3 of these sales over $3 million in Jun-Aug 2013 and only 2 in Jun-Aug 2012. The summer is usually a very quiet period for sales of homes over $3 million.

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 June to August 2013 including:

Subdivision

Address

Sale Price

Sq. Ft.

$/Sq.Ft.

Built

Lot Size

None 6633 E McDonald Dr

$2,850,000

7,521

$379

1953

104,675

Bret Hills 6246 E Bret Hills Dr

$2,995,000

8.288

$361

2011

49,305

Elmaro Estates 6501 E El Maro Cir

$3,100,000

7,201

$430

1995

89,592

Palo Verde Foothills 6216 N 38th Pl

$4,900,000

11,097

$442

2006

59,551

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 much more freely available to well qualified borrowers. For the first time in living memory, the interest rates on these jumbo loans are often lower than for conventional loans. The increased availability of jumbo loans, together with 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

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