State of the Arizona Luxury Market
August 5, 2020
Paradise Valley Luxury Real Estate Expert
The stock market has collapsed, we are besieged by a global plague, and social unrest grips the nation. There are myriad reasons why the real estate market in general, and the Luxury market in particular might be in turmoil. Well, I won’t speak to the real estate market in general, but I can tell you about my perception and observations of the luxury market here in the tiny hamlet of Paradise Valley, Arizona.
We are booming.
At least right now.
Perhaps it is because we are blessed with perpetually fabulous weather. Perhaps it is because we have no earthquakes, no traffic, and few flying pests to contend with (we don’t even need screens on our windows).
Well, we’ve always been fortunate to have those attributes. So what has changed?
Let me first describe my experiences at the beginning of the year, going into the early and mid-stages of the pandemic and shutdown, and now in the heart of the summer – traditionally a slower time.
The year began in record fashion, 10 years into economic expansion, the luxury market was in high gear. In this environment I was able to close on the second most expensive home in Arizona history, a beautiful $17.5-Million-dollar property in which I was fortunate to receive multiple offers, and had a formal backup offer throughout the escrow. Then the pandemic hit, and the canary in the coal mine for me was a foreign buyer, who, worried about troubles at home, pulled out of an 8-figure deal in early February. No new contracts were written in March, and while multiple deals did persevere, two more escrows failed. There was certainly a slowdown, and plenty of concern, though deals continued to move. By April, activity began to pick back up. By May, we were back approaching record levels. By the time June hit- we had surpassed them. As of today, at the end of June, I already have over $90M either closed or in escrow, ahead of last year’s prior record pace. I am not alone. The high-end market is now roaring ahead for all of us.
So why did this happen?
I believe the reasons are multifactorial, and I’ll list a few of what I believe to be the major factors here:
- This is a rebound and continuation of the excellent market we had going into the beginning of the year, with some pent-up demand (temporarily halted by the early shutdown) being
- We have built-in “social distancing,” with regulations requiring at least one acre lots for most of Paradise
- Many buyers are now permanently escaping metropolitan areas that were more affected by the early Buyers from California, New York, Chicago have flooded our market, perhaps less enchanted by their elevator penthouse big-city apartment living.
- The pandemic also seems to have caused more wealthy buyers, perhaps not ready to commit to the permanent move, to look for second homes to ‘escape’ to, that are more spacious and
- Telecommuting has become more prevalent and
- Taxes, Taxes, Many buyers are escaping higher taxes in their cities of origin.
- Even local buyers, also enjoying the fruits of the decade long economic expansion, are moving up to bigger and better
But what about 2008???
Will the current boom last? Is it an artificial boost of pent-up demand? Will we have a repeat of the crash of 2008? For the broader market, only time will tell. But I have reason to believe, at least in the ultra-luxury market, in my tiny hamlet of Paradise Valley, Arizona, that we will continue to see strength. Why? Well, I believe there are some structural and fundamental differences between now and then. In 2008, here in Paradise Valley, there was a huge inventory of “spec” homes. And many were of suboptimal construction, put on suboptimal lots, in suboptimal areas, and importantly, of suboptimal design choice – namely a heavy, dark, Faux-Tuscan. They were also asking exorbitant prices, twice market value in many cases, and the market simply had no capacity to absorb them.
Today is different. There is a massive dearth of “high-quality” ultra-luxury homes, and a huge excess of savvy buyers. There is no large glut of overpriced homes. Even if we do see a decline in demand, which, for the reasons above, I do not believe we will- the scarcity of unique, one-of-a-kind ultra-luxury properties should maintain the market.
For our sake, I hope it does!