I haven’t been to a real estate event in a couple of years, so I thought I’d catch up with the market at the Third Annual Urban Living presentation for the Scottsdale Luxury Home tour. Disclosure: I am a licensed Realtor myself, and I hang my license at a little shop called Infill Realty that specializes in downtown Phoenix. I’m sure the people here at the Wrigley Mansion have never heard of us.
I am here in my yoga clothes among a group of well-dressed men and women who used to sell high end homes when people were still buying them:-) Now they are trying to figure out what *might* sell to their high-end clientele if it’s not a house in North Scottsdale. There’s about a 7-year supply of those on the market and they’re not moving swiftly.
These Realtors do not make it up in volume–one home sale can support them for a year. Or not. Here in Phoenix, the bottom end of the market is selling very well, but downtown Phoenix and downtown Tempe have had only 9 sales last year of homes over $800,000. You can buy almost anything for $50,000 and investors are rolling in and scooping up rental properties by the dozen. I’ve seen all this before.
The first speaker makes the case for living in an urban environment by saying that “people love to hate living in cities.” He points out that people are renting in droves downtown, which he thinks means they will invest soon. I just think they can get a hell of a lot more condo for half the price by renting. And they don’t have to make a commitment to a building that may go into foreclosure or run out of reserves in the HOA.
Most of these Scottsdale Realtors have never been on the light rail and don’t know how to sell downtown. They don’t understand why people would like to give up their cars, participate in the arts, and meet their neighbors. But the speaker makes a good point: since it takes three years to build a high rise, eventually there will be a supply and demand issue and the investment will be good. Oh, by the way, this speaker is British, which means he’s used to urban living.
Some of the numbers downtown are shocking. Prices are great. 44 Monroe and Century Plaza seem to be the speaker’s favorites for value and price, although financially they are not in great shape. If you’re not risk averse, you can buy into one of those buildings for far less than replacement cost per square foot (one measure used by Realtors to define value).
A welcome interlude is the preview of the new plans for Mountain Shadows, a venerable Paradise Valley resort that designer Dodd Mitchell is buying and transforming into a green 5 star hotel with, of course, golf condos. And teak handcrafted bathtubs from Bali. Reminds me of a blast from the past: I’ve seen so many of these developer presentations, and so many of the resulting projects. Timing is everything; he’s got to hit it on the upturn. I wish him well.
Last is my friend Keith Mishkin, who is the original “urban” broker. He grew up in New York. He gets it about who the market is. He has the numbers. Last year in the Valley, there were 70,000 closings.
The luxury market represented .1% of them.
The previous year, a luxury home was one for which the buyer paid $600/sq.ft. This year, we redefine luxury as $500/sq.ft There were 77 of those. Million dollar homes? 71 closings. Some of the people in the room didn’t sell a home last year, that’s for sure.
But Keith, who is growing his hair long until the market turns, is guardedly optimistic for the short term and very optimistic for the long term. Our urban market only has 4300 units. 70% have been absorbed.
So for 4,2 million people, there are only about 800 units.Las Vegas and San Diego have 4x our supply of condo units
, and since it takes two or three years to build a high rise condo building and no one is starting them now, what looks like oversupply will turn into a big undersupply. After all, aging buyers are looking for maintenance-free fun.
Keith is incorrigibly optimistic. He says you can now buy luxury high rise in Phoenix for below replacement cost. He talks about the place I used to live, the Camelback Corridor (I lived in the first luxury high rise built in Phoenix, until my dog bit a neighbor’s dog and I came to my senses). He says there are “only 71 resales.” To him, that’s next to nothing. But to some of my former neighbors, who would love to sell after the inevitable changes that occur in life, it seems like a great many.
Half empty? Half full?
{ 2 comments… read them below or add one }
We recently bought dirt cheap in the Camelback Corridor. It’s a second home and my husband lives there during the week — he works in Tempe. The rest of the time, we live on the edge of nowhere in Wickenburg.
I wouldn’t call it luxury, but there’s something to be said about urban living, where shopping and dining opportunities are walking distance away.
I don’t go down there much these days. Bad for my diet.
Appreciate hearing the re-cap on this event. Would have liked to attend (if there were more hours in the day).
In many ways, the pendulum has swung from one direction in 2005 to the other in 2009. Some parts of our real estate market are just going to take (a lot) longer to recover than others.