By Mike Bodeen · 17 April 2023
The amazing Cromford Report, which is our chief supplier of residential real estate data in every possible category, and more, is also my chief inspiration for many of my snapshot articles. And I’ve said it before, Cromford’s CEO, Michael Orr, many years ago now, selected the Phoenix metro market to provide data found nowhere else – in the world perhaps.
So, I came across the first chart today, our Metro 40 City ranking of the most expensive cities to live (per square foot – PSF) to the least expensive PSF in Phoenix Metro. And then giving us the annual average price per square foot (PSF) now versus one-year ago. Take a look for your city:
What popped out to me is that if anyone bought a home in April of 2022 in Scottsdale, that property, per the chart, gained 14% in value in one year. But wait a minute you say, prices crashed since last year, right? The numbers don’t lie. Every one of these 40 cities gained value this past year.
But then again we do know that prices dropped. So, this thought sent me to find the next chart (see below), the Monthly Average sales Price PSF chart. This is interesting for many reasons. The great takeaway shows us that prices, like stocks, rise and fall, but the long-term bet is always the best.
Yea, but what if you bought at the top of the market and sold at the bottom? You lost money, right? Yes, I can’t argue with you there. But let’s look a little closer, even for those who bought at the May of 2022 peak of the market – $306 PSF. Eight months later (Jan 2023), if you sold you lost 13% of the purchase price ($271 PSF) – and you should. Throughout my four plus decades of professional representation of buyers and sellers, I would warn anyone that if you need to sell in 2-3 years, you will lose money.
Going back to buying at the $306 top of the market, and assuming you still own your property (and my clients do), that $271 bottom has already risen to $285 PSF – a 5% gain in 3 months – (see chart).
Further, what we’ve been reporting about recently, is that Phoenix Metro has a real estate problem, but it’s not about a price crash. No, it will be the continued non-affordability of our residential real estate. The current value trend is heading north again.
Not long from now, this 8 month down cycle will be seen as a blip in the market. If someone did buy at the top last May, and didn’t sell, they may soon be rewarded with increasing equity like everyone else.
Mike Bodeen
Market data referenced in this article comes from The Cromford Report.