The North Scottsdale real estate market is killing it! The seven zip codes which comprise North Scottsdale are currently showing a monthly median sales price of $715,000. One month ago, the median sales price was $650,000. This is a median increase of $65,000 in one month! Yes, you heard me correctly, the North Scottsdale median sales price rose $65,000 – 10% – in one month.
Listing inventory in North Scottsdale has plummeted. One year ago, North Scottsdale home inventory was at 1409. This year, there are only 1044 homes currently for sale in North Scottsdale – a 26% drop!
How about North Scottsdale rentals? Rising to record lease prices, North Scottsdale home rental prices just hit $1.45 per square foot (psf) this September. This is .06 cents psf higher since last month and a rise of .17 cents psf in one year – a 13% rental price increase.
The story goes that Jack Swilling, a confederate veteran of the civil war, while traveling through the Salt River Valley in 1867, saw a potential spot for farming. He formed a community that same year about 4 miles east of our present city Phoenix. Lord Darrell Duppa, one of the original settlers in Swilling’s party suggested the name “Phoenix.” It stuck.
According to ancient mythology there is a long-lived bird that is cyclically regenerated or reborn, known as the Phoenix. Associated with the Sun, a phoenix obtains new life by arising from the ashes of its predecessor.
A phoenix depicted in a book of legendary creatures by
FJ Bertuch (1747-1822)
Was this a highly prophetic name given to our illustrious city? Over the decades our community has certainly had more than its fair share of real estate ups and downs where home values would crash and burn followed by catapultic value rises. Are we in the midst of a catapultic rising phase once again?
First, the numbers. Case-Schiller’s most recent 20 city home price index shows that for the 3-month period ending August 2016, Portland (11.7%) and Seattle (11.4%) have had double digit appreciation compared with August of 2015. Okay, no surprise there. Nor is it a surprise that Phoenix is in the middle of the pack with a 5.2% annual rise. We’ve been reporting for months now that we’ve been experiencing a balanced, non-bubble market.
But what is of interest is that Phoenix has risen to the top of all cities for its month to month appreciation (5.9%) up from 5.5% in July.
Bubble time for Phoenix? Not here, not now. Sustained growth? I think so. For the first time in decades, Phoenix will continue to grow and prosper. Our current population growth is being fueled by folks who want to live here. Aging boomers and ‘finally getting smart’ millennials want to live here.
We are currently in our 5th year of rising values but still have not met the peak of $184.00 per square foot that occurred back in summer of 2006. The valley currently sits at $140 psf – and rising!
Consistency in Phoenix – Who Would Guess?
Back in February of this year, we reported that our local Phoenix Metro residential real estate market, as a whole, was strong and balanced. Currently, when we remain “in balance,” at least when looking at the Valley as a whole. The story changes a little bit of course when you break down the market by price. $500k and up for example is generally dreary for sellers, where as the $250k and under sellers are swimming in buyers begging for their homes. For a market that was known for radical highs and lows this past decade, our continued consistency is remarkable.
From a Realtor perspective, the market has been strongly balanced for the past 3 years with a few periodic dips and rises, but with consistent annual appreciation. This appreciation has enabled the new home market to strengthen as well giving buyers more choice in homes then we’ve had since the great recession.
The most recent market numbers:
- Active Listings: 20,153 versus 20,024 last year – up 0.6% – and up 5.0% from 19,186 last month
- Pending Listings: 6,065 versus 5,789 last year – up 4.8% – but down 4.2% from 6,331 last month
- Under Contract Listings: 10,013 versus 9,003 last year – up 11.2% – but down 3.0% from 10,318 last month
- Monthly Sales: 7,390 versus 7,003 last year – up 5.5% – but down 7.1% from 7,952 last month
- Monthly Average Sales Price per Sq. Ft.: $141.92 versus $133.44 last year – up 6.4% – and up 2.2% from $138.81 last month
- Monthly Median Sales Price: $230,000 versus $213,000 last year – up 8.0% – and up 1.0% from $227,800 last month
There is much chatter these days about economic changes that will be happening following the election. Some buyers and sellers have put off buying and selling until January. The best change is that as a country we can hopefully move on from the political drama that we’re seeing moment by moment. Wouldn’t it be refreshing to say that our country was strong and balanced rather than weak and divided?
According to Michael Orr of the Cromford Report, the average closed lease rate for all Phoenix Metro areas and home types within the Arizona Regional MLS (ARMLS) is 85.1 cents per sq. ft. per month. This is great news for landlords, but not so much for valley renters. Last year it was 81.0 cents which means an annual increase of 5.1%. Two years ago the number was 75.0 cents and in July 2013 it was 69.6 cents. This shows a rise in rents of 22.3% in the last 3 years! This is dramatically faster than the increase in average wages. Consequently, the typical tenant has a lot less to spend on things other than housing.
This situation is very good for landlords and should create motivation for tenants to become home owners. High rents, however (per Orr), reduce disposable income and so impairs the ability to exercise that motivation to buy. It also reduces the demand for other goods and services. Tenants tend to feel less wealthy than they did 3 years ago unless they have improved their earnings through promotion or job switching. This goes some way to explain why a significant number of people think the economy is doing poorly when almost all the actual numbers are quite positive. Wealth is draining away from tenants but expanding for real estate property owners. With that background it is counter-intuitive that renting has become more popular even for people who can afford to own.
There were 2,998 active rental listings as of Saturday, down from 3,291 on July 23, 2015 and 4,474 on July 23, 2014. In 2008 at this point there were 8,525. Supply appears to be very tight and failing to improve.
Wealth is draining away from tenants but expanding for real estate property owners. With that background it is counter-intuitive that renting has become more popular even for people who can afford to own.
– Michael Orr
When my family relocated to the Valley in 1994, it was a hot new-home sales market. North Scottsdale in particular was building incredible communities such as Grayhawk, McDowell Mountain Ranch, Scottsdale Mountain, Scottsdale Ranch ad infinitum. These brand new communities also provided top notch amenities, and certainly qualified as move-in ready at the time.
Fast forward 20 years. The communities are still a huge draw, but the new home newness has worn off. These upscale homeowners have discovered that roofs leak, heating and A/C units fail and need replacement, hot water heaters were probably replaced 2-3 times, and exteriors need attention/painting, again. In short, they are no longer “move-in ready.”
And that’s just the outside.
Inside, that wonderful Corian hard surface countertop is still in great shape, just not what HGTV is serving up in 2016. Slab Granite is still popular, but 10 year old granite counters look like, well, 10 year old granite counters. Quartz (engineered stone) and newer designed slab granite are the new popularity winner. Even the wonderful Travertine tile that was so “in” ten years ago is now showing its age susceptibility. Hardwood (always in), and wood-design tiled floors are the new (old) kids on the block. Here’s a good website to check out: http://homerenovations.about.com/
It’s no accident that flippers are again starting to experience a lot of success in the Phoenix Metro real estate market. They are providing a finished product much in demand, especially with the rise and success of HGTV cable TV programs, such as “Love it or List It,” “Fixer Upper” and “Property Brothers” among others.
“Local sellers are taking quite the hit on price if they’re not updated, and if the updating was ten years ago, that’s ancient, design-wise. Buyers want new and now…”
Local sellers are taking quite the hit on price if they’re not move-in ready, and if the updating was ten years ago, that’s ancient, design-wise. Buyers want new and now, which is a big reason why new home sales are taking off again in the valley. Though many buyers would love to remodel new, very few buyers have the additional cash required to accomplish that expensive feat. In the financing heydays of not that long ago, but before the crash, banks were so happy when you closed on your home they gave you a $50,000 line of credit at closing which you didn’t even have to spend on your home. Hey, new car, vacations, you name it. Spend it. Well, no more.
For someone who has the financial resources, there are very good buying opportunities availing themselves right now, because these outdated but well located homes are not getting decent offers, if any at all. They’re lagging on the market if not priced aggressively. Prices for homes over $500,000 are slipping.
It’s now apparent that we are in a difficult market for homes that are not “move-in ready.” What’s an owner to do if they’re thinking of selling? Here are some options:
1) Price it aggressively
2) Rent it out if you’re relocating
3) Stay, fix it up and enjoy it
4) Stay, don’t fix it up and enjoy it
On the positive flip side, if your home is “move in ready” or fairly close to it, you will do well. Best neighborhood price, shorter market time.