With bidding wars, appraisal waivers and an influx of out-of-state buyers, demand for high-end real estate is raising the specter of an unbridled luxury market.
Amid rapidly-increasing home values, luxury real estate in Arizona is in high demand, with bidding wars, appraisal waivers and an influx of out-of-state buyers raising the specter of an unbridled luxury market, agents said.
Throughout the pandemic, the state has drawn affluent buyers from both nearby states like California and colder cities including Chicago, agents said. In September, a 17-acre estate in the Silverleaf neighborhood of Scottsdale sold for $24.1 million, notching a new record for the state. Another mansion in Paradise Valley sold for $18 million in cash earlier this month. In Phoenix alone, 371 homes priced above $1 million sold in September.
The demand comes in large part due to out-of-state buyers drawn by Arizona’s warmth and lower prices compared to coastal cities like Los Angeles, Coldwell Banker Realty Realtor Jo Ann Bauer said. While $1 million is barely enough to break into the market with a starter home in Los Angeles, in Arizona the sum affords a nice home with views of the desert and yearlong sunshine.
“Arizona is a destination state,” Bauer told Inman. “We are seeing a lot of buyers coming in from out of state, like California — where home prices are significantly higher — sell their home and then use the funds to buy the very same home for two or three times less.”
For more than a year, the state has had some of the highest home value growth in the country. According to data from CoreLogic, single-family home prices in Arizona experienced an 11 percent increase in September compared to last year while that number was 6.7 percent nationwide. Such growth is driven not only by mid-range and affordable homes, which attract residents coming to the state for its bustling job market, but also high-end homes eyed by buyers who are interested in Arizona as an escape destination.
COVID-19 is helping fuel some of that interest — land, which many Arizona estates offer in abundance, has come out as a priority for buyers looking to wait out the outbreak. Bauer is currently working with a buyer who, at the start of the pandemic, tested the waters by buying a condo in a luxury Scottsdale community. After liking the Arizona lifestyle, the buyer decided to make the state a primary residence and is currently looking for a detached home within the range of $1.5 million.
With the Arizona Regional Multiple Listing Service reporting total inventory in the state down 25.7 year over year, bidding wars for that type of home are becoming more common. But while the hot market has been great for agents, buyers said it’s causing frustration among locals who are seeing prices for both luxury and mid-range properties driven up by affluent out-of-state buyers.
“We’re in a perfect storm of very low interest rates and historically low inventory,” Bauer said. “That combination is being pinched by out-of-state buyers who want to sell and move up into a luxury pool. We’re seeing a lot of our mid-range sellers stay put because they don’t have the property to move into.”
Sales of homes within the $1 million and $6 million range grew by 49 percent year over year in October, according to Arizona Regional Multiple Listing Service data first reported by Forbes. In Scottsdale, homes worth between $3 and $4 million jumped by 82 percent compared to October of last year. Many others buyers are choosing to forgo the home search entirely and instead build from scratch.
“People are migrating to areas that are less dense, that are well planned, that have beautiful amenities and all of the things that Arizona offers,” Julie Hancock, managing director of Scottsdale-based luxury homebuilder Camelot Homes, told Forbes.
Amid the pandemic, the kind of luxury homes that have sold fastest in the rest of the country are also in demand in Arizona. More land, sprawling yards and amenities such as pools and gardens are features buyers ask about most frequently, agents said.
But the high demand is also creating problems formerly unheard of among luxury agents in the state. Bauer said many homeowners have received multiple offers within hours of putting a property on the market. To make sure they secure a property quickly, some attempt to stand out by offering to pay in cash or by working out deals with lenders to waive appraisals.
“In this particular market, a luxury home can really start at a price point of about $750,000,” Bauer said. “I would assume that the baseline of our luxury homes is going to increase as we go into 2021 and that is going to start trending into mid-range pricing.”