Yes, the media has gone gaga, and not just locally, but also nationally about how much the Metro Phoenix (including Scottsdale) market is up year over year. Up is a relative term though. Yes its up 25% roughly at the median and mean price points, but it was also down around 60% so now that we are at 40% of the former 100%, up 25% from 40% gets us half way to where we used to be. Put in another way, the $1,000,000 home that dropped to $400,000, if it went to $500,000, its now up 25% from a year ago and only needs to go up 100% more from here to get to where it was in 2006! No need to panic. We are STILL down 50% from the top.
They say a picture is worth a thousand words. See the graph below. Based on NORMAL trends we still aren’t to where we should be. If anything, we are going through a correction back to where we should be based on this graph from ARMLS. We should be around $120/sq foot based on historical trends and we still are at $83/sq foot! We would have to go up another 50% roughly (hey, that is half way to where we were!) to get to where we should be. Talk of another bubble makes little sense. This would have to go on for a lot longer for this to be a “bubble.”
The other thing to keep in mind is this is happening at the median and mean price points. Those are still under $200,000. Not at the $1,000,000 price point. Its price specific. As one goes up in price, the home increases are less as the less expensive product always bottoms first. The luxury market, $1,000,000 and up typically trails the mean/median price points by around a year. That means the luxury market is bottomed in the last few months. When one goes up to $2,000,000. The market has vastly improved, but is not yet increasing. Its just not hurting like it was 2 years ago.
Whether one looks at homes in Paradise Valley, golf homes in Desert Mountain, or Mirabel, the market is improving across the board. It is improving more rapidly the closer one gets to the 101, and even more so as one gets more central. So homes in DC Ranch or Grayhawk are recovering quicker than ones in Whisper Rock. And Gainey Ranch and McCormick Ranch are improving even more rapidly.
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