This market has been and will continue to be competitive and fairly quick moving.
How can a $400,000 Flagstaff townhome get snatched up within a week of the listing, a beautiful custom home at $700,000 sits with very little showing activity for three months in a row, and in the adjacent neighborhood, a million-dollar listing has multiple offers within 72 hours of going on the market?
It all doesn’t make sense unless you understand the market split and where the demand and supply in our Northern Arizona real estate scene are moving in different ways, causing buyers and sellers to have drastically different experiences.
Let the Numbers Talk
This is where I nerd out a little bit on the numbers but bear with me and the picture will start to gain some clarity! In the Flagstaff townsite per the Northern Arizona Association of Realtors, we’ve had 546 homes sold (see chart), which is slightly up from last year but the trending-by-price-point story is very telling. Sold homes in the $600K-$999K price point are down by 10%, whereas the “affordable” sub-$599K and the “luxury” over $1 million are both up over 10%.
That’s a look in the review mirror, but before we create some larger context, let’s also look at what is happening currently with active listings. As you can see, active listings are also mirroring the trending by segment to some extent but with a massive upward pop in luxury.
Three Markets, Three Different Strategies
Without much change expected in interest rates and the economy for the next six months, my guess is that we’ll continue to see clear splits in our real estate market.
Group 1: The Affordable Market
The sub $600K price point is where you have competing demands of everyone from the first-time buyer to the second homeowner, to the NAU parent with student housing goals, to investors, etc. This market has been and will continue to be competitive and fairly quick moving.
I would advise first-time buyers to connect with local real estate agents so you can act fast on these listings when they come up and to also have a team of experts both in local financing and local trades (contractors, roofers, electricians) established, so you can bid competitively and work through property conditions, as much of this inventory could need minor repairs or updates. If you are willing to put in the work, this could be where a Flagstaff Deal can actually be found!
Group 2: The Move-Up Market
Homes in the $600-900K price point would typically be purchased by the move-up market, the folks wanting a little more space, an extra bedroom, a different school district. However, that move-up buyer is feeling stuck in their current home that they have a 2% or 3% interest rate on. They are likely getting creative and doing things like taking out an equity line and remodeling rather than moving up.
If you are buying in this price range, you may be dealing with a motivated seller or you could be dealing with a move-up seller that has a 2% or 3% rate as well and is not highly motivated unless they get what they want. Be prepared to deal with a variety of negotiation sentiments but know, this may be the most potentially desperate selling category and the right time and situation could get you a deal!
Group 3: The Luxury Market
This is truly a broad category but we’ll blanket this with $1 million as the baseline. There are definitely varying demands for this type of property, heavily based on location, condition and amenities.
For instance, we see a strong cash, second-home demand in gated, golf communities whereas the luxury demand outside of those communities seems to be more primary residence in nature. Regardless of occupancy intent though, these buyers tend to be less economically sensitive and we’re seeing that in the statistics. Just like the Move-Up Market, motivations of sellers may vary but with some strong appreciation under their belts, we are seeing some motivated sellers ready to cash out, re-diversify their portfolio and/or move into other markets.
No Deal is Alike
While many folks like to oversimplify and try to classify a moment in a market as either a good time to buy or a bad time to buy, I would encourage the would-be homebuyer to avoid that. Frame it differently as to what the circumstances and your personal goals are today vs. where they could be in the future.
I do believe, generally speaking there are some great opportunities in this market, especially as the rate volatility keeps many buyers on the sidelines and that could mean things like price reductions, repairs negotiated, buyer incentives from the seller, etc. – all things that may not exist in the years to come as our inflation economy finally settles and we see a sub-6% interest rate. FBN
By Chris Hallows
For additional information or to schedule an appointment visit ChrisHallows.Benchmark.us or call 928-707-8572. The Flagstaff location is 824 W Rte 66 Suite A-3.
Chris Hallows is the Branch Manager & Sr. Mortgage Advisor of Benchmark Mortgage Flagstaff.
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