Surging luxury real estate market establishes new price floor in Arizona

By LINSEY STONCHUS

During the past 12 months, Arizona has seen enormous demand in real estate, especially in the luxury sector.

The attention that cities such as Phoenix and Tucson have received is so substantial that it may have established a new price floor. Arizona-based Long Realty’s inventory, for example, has been reduced to two months and the average time on market has dropped from 89 days to 39 days in Phoenix, with this added demand translating to a 189 percent growth in properties under contract since last March.

“I think we were a little bit surprised last year by how much luxury grew,” said Kevin Kaplan, vice president of marketing and business development at Long Realty.

“We didn’t know what to expect in the early days of COVID and luxury just really exploded and gained momentum into this year,” he said.

Price is tight

With the Arizona market attracting buyers from expensive metros such as Chicago, Denver, Los Angeles and New York, the region is still seen as a value by comparison.

Meanwhile, local buyers are feeling the pressure of rising prices.

“We get the sense that this is not temporary, where prices are up, and then in three months, they’re going to go down,” Mr. Kaplan said. “This is the new floor, especially on the high-end.”

In fact, Mr. Kaplan has witnessed a rapid upswing in the sale of multi-million-dollar homes. Much of his brokerage’s luxury portfolio previously included sales of homes between $1 million and $2 million.

“There’s an increase in multi-million-dollar home sales,” Mr. Kaplan said. “That was stagnant for many years.

“In just the last two weeks, we had two closings over $3 million,” he said. “We’re see that multi-million-dollar market pick up quite a bit.”

Wider availability of permanent or flexible work from home options has positively influenced Arizona’s market, with buyers choosing the state for its financial and geographic benefits.

Mr. Kaplan notes that Arizona’s low cost of living, property taxes and home prices all play a role.

Of course, the appeal goes beyond financial.

Location bests

In a survey conducted by Long Realty, neighborhood and location were remain the most important elements among buyers. This was followed by views, with many looking for gorgeous natural landscapes and better privacy.

Added space, too, was extraordinarily attractive.

Mr. Kaplan observed the popularity of homes including not one, but two home offices, to accommodate couples working remotely.

Extra rooms, in general, were popular, as they allow the homeowner flexibility for added amenities to live out their idyllic lifestyles.

One limitation within the market is a desire for new homes, with almost a quarter of those surveyed noting that a newer home is important to them.

Even with multi-million-dollar price points, home prices are still relatively low compared to other markets, which frees up some money to make renovations.

Second-home purchases, too, are on the rise in Tucson and Phoenix.

A significant sub-group of second home buyers in Arizona consists of those close to retirement, having realized it is best to buy their final homes now before prices rise further.

AS FOR THE demand, rising prices and low inventory, Mr. Kaplan anticipates little change during the next few months.

Although challenges exist in the competitive market, it is overall a positive outlook.

“Demand isn’t going away, but the inventory side still being challenging,” Mr. Kaplan said.

“Overall, our economy is going to start recovering and that’s going to accelerate everything,” he said.