Phoenix luxury home market slowly recovering
As metro Phoenix home values surged and foreclosures and short sales waned throughout last year, homes priced at the lower end of the market have received the bulk of the attention.
But what about those million-dollar mega homes that saturate high-income submarkets such as Scottsdale and Paradise Valley?
A new report from local real estate expertsMichael Orr and Walt Danley shows the luxury home market — which accounts for homes priced above $1 million — did not experience the extreme declines as seen in the overall Valley housing market. In addition, values on those homes have been recovering at a slower pace than most.
Orr is a real estate expert at Arizona State University’s W.P. Carey School of Business and author of the Cromford Report in Phoenix. Danley is the president of Walt Danley Real Estate in Paradise Valley.
The number of Phoenix-area luxury home sales peaked in 2005 at 1,563 — almost four times the sales volume reported four years earlier, the report said. Although sales gradually declined thereafter, luxury prices peaked at $404 per square foot in Dec. 2007.
But those mega-home values tumbled beginning in 2008 as the housing crisis crippled the Valley. While luxury home values continued to decline for a longer period than those of lower-priced homes, their overall peak-to-trough decline was not nearly as dramatic.
For example, luxury-home prices hit bottom in February 2012 at $277 per square foot, while the rest of market had already been rising for four months prior.
Although that February figure was a significant 31 percent drop from the 2007 peak, it was still less of a blow than the whopping 59 percent decline the rest of the Valley housing market experienced from its peak.
Last year, luxury home sales — about 800 — reached the highest level since 2007. By the end of 2012, luxury home prices had also risen slightly by about 5 percent to $291 per square foot, and are expected to continue rising, the report said.
And, unlike the Valley housing market’s potential “chronic supply problem” that Orr indicated in another recent report, the supply of luxury homes for sale was roughly in balance with demand by the end of last year.