There are a lot of luxury homes for sale in the Phoenix/Scottsdale, Arizona.
For most of spring 2016, I've talked about how half of the market is pretty hot and the other half, not so much. Homes under $250K are a hot ticket. From $250K-$500, the market fluctuates back and forth between buyers and sellers, but is closer to balanced. Above $500K, it's not a pretty story for many sellers.
As of 5/31/16, single-family homes (SFR) in Maricopa County over $500K represented 35% of all active listings, but only 10% of the homes that actually sold in May.
Ouch! However that sobering statistic doesn't discourage other sellers with homes above $500K from listing their homes for sale too. There are many reasons they want or need to sell.
- Canadians are cashing in on properties acquired during the recession while the US$ is stronger than the CA$
- Empty-nesters/Baby Boomers are downsizing
- Sellers are moving on from 2nd/vacation homes they no longer need
- The "other" usual reasons:
- relocation for work,
- major life changes, like divorce, death, growing family, etc.
Buyer demand is fairly static, but the sheer number of listed homes puts downward pressure on pricing. In theory, the laws of supply and demand should force sellers to reduce their price or delay selling, but that's not the case. Many are content to sit and wait. I have and had a few higher end sales/listings myself this spring and have seen the best and worst of this market segment.
I wanted to know what was driving buyers to or from luxury homes on the market today.
I focused primarily on what I call "The Core" of the Metro area (Thompson Peak Pkwy south to the US-60 FWY & from the I-17FWY east to Pima Rd.), where I work most. Specifically, I looked at SFR sales over $500K that sold within the last 30 days AND spent no more than 30 days on the market. 182 home sold within 60 days of 6/20/16, but I wanted to know why buyers wanted THESE homes so bad that they sold in less than 30 days and a few for full or over asking price.
I analyzed these homes for the features in a home buyers tell me they want and the ones to which they all gravitate. They included:
- Neutral paint (white, linen or gray)- Yes, buyers will actually specify that they want this more contemporary or modern color palette that presents itself as more "light and bright" than the "desert tans" of the last decade or so.
- Modern or professionally staged styling- Even though furniture rarely sells with a home, buyers frequently comment that a seller's furniture and/or decor are "awful!" The listing photos often turn them off before they actually get inside!
- A great room floor plan- all one open kitchen, living, dining space as opposed to formal, individual areas.
- Wood or "wood tile" floors- I'd like to make the distinction that though most buyers like the look of wood (engineered or solid), they all tend not to embrace laminate wood floors like the other 2 options. Tile (natural stone, porcelain, ceramic or otherwise) has it's share of maintenance-anyone have dirty grout lines?? Who loves carpet when living in the dusty desert??
- Recessed lights- no- buyer I've worked with has specifically requested them, but in my experience, buyers sure seem to like them a lot. My theory? They're bright and give a modern feel.
- A good school district- keeps values strong; again this both subjective and relative. I tried to stick with schools/districts that agents actively market as a feature like "3-Cs" (Scottsdale USD), "Madison [Elementary] Schools" (N. Central Phoenix), etc.
- A large lot- by large, I mean large relative to the immediate area. I do not expect anyone buying in Arcadia Lite, Old Town Scottsdale or the historic districts of Phoenix, (i.e. Willo or Encanto), to have a burning need for an acre lot.
- A remodeled kitchen
- A remodeled bath(s)
- Single-level- whole house all on one floor
- No interior steps- not the same as single-level. There may be transitions between minor levels if you have a hillside home and many homes in the 80s have sunken areas like living rooms or bedroom sitting areas. Everyone's favorite is usually the sunken fireplace conversation pits...
- A private pool- it sure is nice not to have to pack up your stuff and go anywhere to swim on a hot day...
- Views- city, mountain, golf course, etc.
- A newer home- less than 10 years; for the record "new" is a relative term. I went to a university founded in 1689, was married in a church built in the 1800s. However, since AZ wasn't even a state until 1922 and most of our area's development occurred in the 1950s or later, most people think everything here is new. And what's "old" is more often dictated by decor than it is by architecture. All that said, people in AZ love newly built homes, especially when they come from places like where I grew up in the Northeast.
Did any of the above criteria correlate to what was actually selling? Here's what I found out:
You can see the list of these homes that sold for yourself: http://www.flexmls.com/link.html?17xjtrgn0tzv,12,1 (Do note: this link is valid until 7/22/2016.)
Of 34 homes that sold in 30 days or less and closed within the last 30 days (of 6/20/16), the following features really stood out! The top 5 features of the 14 I tested were:
- 94.12% (32 homes) were in a good school district- the taxes in our area are low relative to the rest of the US. I'm not sure most people can note the difference in taxes from area to area based solely on school district, however for families that choose send their kids to a nationally ranked high school like Chaparral (Scottsdale USD) or have a gifted child that would benefit from attending Sonoran Sky (Paradise Valley USD) or maybe don't want to give up sending a child to a highly-ranked school that would require them to provide transportation at length to/from school, it's a huge draw since kids spend a roughly 13 years in school before going on to college or university-level studies.
- 91.18% (31 homes) were single-level- no stairs to another floor is a big draw for growing families, to "mature" homeowners who prefer to age-in-place or households with physical challenges that make navigating stairs a deal-breaker.
- 76.4% (26 homes) had a private pool- it was 118-degrees on Sunday. Makes sense to me.
- 70.59% (24 homes) had lighter white, linen or gray-ish paint (cool tones) throughout most of the home. Paint is also one of the pre-list repairs I recommend because it is relatively inexpensive and can make a dramatic impact.
- 70.59% (24 homes) had recessed lights throughout most of the home. If you know me or have worked with me, this is one of my favorite pre-list improvements because the ROI is pretty good for what you spend.
Of the 34 homes that sold, 11 homes (nearly 1/3) had 10 or more of the features I tested. Of those 11, all but 2 had each of the top 5 features. The 2 that didn't had 4/5. That lends a little more credibility to my methodology...
Other features that were well-represented included:
- remodeled kitchens (64.71%)- remodeling sucks. If you can pay for someone else to do the work and you like what's there, most people will and they'll pay a premium too!
- no interior steps (61.76%)
- remodeled baths (58.82%)- what goes for kitchens, also goes for baths. They are 2 of the most expensive areas of a home to renovate. Finance for a few $ more per month or save, save, save, find a contractor, etc..... I know what most people would do.
- large lots (52.94%)- even though remodeling sucks. If you don't want to spend the money to move OR you can't sell your house, having the room for an addition goes a long way. I've been there. Our 8YO wasn't ready to go to a room on the other side of the house 3rd kid was homeless until our addition was built and the .
Next I thought about the location, specifically zip code. While zip codes can be disparate due to size, etc. There was still good info to be had.
Almost 65% of these sold homes were in 3 zip codes:
- 85018- Arcadia made up a whopping 26.47%. It falls within Scottsdale USD & was established primarily in the 50s & 60s with mostly single-family homes.
- 85254- The Area just north of Paradise Valley (85253) that has a Scottsdale Address, but only a tiny section actually in Scottsdale. Most of the zip code falls within the city of Phoenix (thus PHX taxes). Most of the area is in Paradise Valley USD (which is NOT in the town of Paradise Valley- 85253) or Scottsdale USD schools- 23.53%. It was mostly developed in the 70s and 80s, but is lush green & has SUSD Schools- particularly 3Cs- Cochise (not Cherokee), Cocopah & Chaparral.
- 85258- McCormick Ranch was cut in half by my boundaries, interestingly though, Pima Rd splits McCormick Ranch & Scottsdale Ranch and all the homes in my sample were in the boundaries of McCormick Ranch- 14.71%
In a nutshell, if you're a seller with a high end home in this area, I'd take a good look at your home and see how many of the top 3 or top 5 attributes you can implement into your home... At least 3 of them can be implemented to most homes, 2 very easily. You can't pick up your house and move it though...
A few other notes:
- All 3 areas are fairly accessible to at least 2 of the areas major business/transport centers via freeways and/or main artery roads (i.e. Scottsdale Rd., Shea Blvd., Camelback Rd, Tatum Blvd., 44th St, Bell Rd, etc.): Downtown Phoenix/Sky Harbor Airport, Camelback Corridor, Tempe/Old Town Scottsdale & Scottsdale Airpark.
- The average number of days these homes spent on the market was 14. For comparison, the 182 other homes that sold in the area I analyzed, took an average of 123 days to sell. What's the difference in holding costs for the average $818K home for about 4 mos?
- Many of these homes could probably be considered "entry point" homes to areas immediately surrounding them that are larger and/or more expensive.
- 4 of these homes never actually hit MLS- of those 4, 3 were in 85018. It's usually a good sign when deals get done off market. I personally did one earlier this year that approached the $500K mark and it was in McCormick Ranch, 85258, but would not have been included in this analysis. The only reason they appeared in MLS is for the agents to boost the area's sales/values (and/or their own numbers) by documenting entering the listing.
- I'd like to note that these homes sold for an average of 98.98% of list price! That's really high... careful pricing is so important, but I'd like to point out that buyers aren't stupid. Most pick up on what the market is doing, but their agent is likely to guide them if they don't. Most buyers will know if sellers have had their house listed on/off the market for years and they'll wonder why.
To that point, pricing a home at or just above market value is usually the way to go. Sure, you may miss the off chance that the "one person" who is likely to pay a mint for your home and has the cash to do it. However, since cash purchases represent less than 20% of ALL closed sales as of 6/5/16. Why put all your chips on what may be one of your largest assets on 18% chance of having a cash buyers??? For comparison, of the 182 other homes that sold in the area I analyzed, they sold for an average of 95.75% of list.
If you have a home over $500K to sell in the next 6-12 mos., look at the current state of your home & start thinking about what you can do to make it desirable. Better yet, have someone (not your best friend & preferably me) walk through your home and let me/them tell you specifically how well (or not) your home falls into the criteria of what drew some of these other buyers to run, not walk, to these homes.
Note, that if your home does not fit most the criteria above, really think about whether the sale price is something you can live with. Not only will sitting on the market indefinitely NOT sell your home, it will still cost you money to not sell it, especially if it's empty. There are alternatives to selling, like leasing your home. It's not a bad time to be a landlord, but if it doesn't work for you, you'll have to be patient and keep putting your best foot forward.
Buyer take away:
Yes- there is a buyer take-away other than there are lots of options to see right now. Think carefully about the home you do buy, because someday, you (or your heirs) will become the seller. Sometimes this will happen sooner than you've planned for various reasons, both good & bad. Is the home you're buying one that may not fit the mold if you had to sell quickly? We've worked with buyers who've bought, then sold again within a few years or even within a few months. You never know...
The final word:
Before those of you mathematically-minded folks get all over me for the methodology and the small sample size, understand that I know the data can be skewed by nuances and/or the market WILL fluctuate, but you need to know:
- I'm not a rookie. I've been looking at this info with these areas for over a decade (not combined with anyone- just me) and I've listed/sold hundreds of homes. Besides that, I've actually spent quite of my career BRE (before real estate) in some sort of analytical capacity
- because of the hyper-local nature of real estate, too large a sample size will become too generalized to serve much purpose &
- I'm a Realtor®, not a statistician. If I had time to analyze hundreds of listings all day long, I couldn't actually sell any houses.
So I did the best I could with the time I had, but if anyone is just dying to delve in, let's collaborate. :) All that said, if you have any questions, call/text me or email me, I'd love to hear from you and give you a few more specifics.
Other recent posts:
Renting a House in Metro Phoenix: What you need to know
June 2016 Phoenix Metro Real Estate Snapshot
Summary of Metro Phoenix Real Estate: Jan-April 2016