I’m ready to stick my neck out and say that Flagstaff home prices will not rise as rapidly in 2014 as they did in 2013. All the national experts are saying this about the market in general and the movement I’ve seen in Flagstaff in the first 2 ½ months seem consistent with that. Plus, the Arizona economy is not roaring along. Arizona’s manufacturing sector, which includes aerospace and tech, had 1,100 fewer workers in January than a year earlier. While overall employment in Arizona was slightly up, these higher-paying jobs are what could make the housing industry boom.
As of March 8, Zillow (which I don’t like for specific home values, but which generally gets the trend right) said this about Flagstaff: “The median home value in Flagstaff is $273,700. Flagstaff home values have gone up 10.6% over the past year and Zillow predicts they will rise 2.6% within the next year. The median list price per square foot in Flagstaff is $174. The median price of homes currently listed in Flagstaff is $338,912 while the median price of homes that sold is $282,500.”
Zillow describes the Flagstaff homes market as “healthy,” but its statistics reveal that 19% of homeowners in Flagstaff are still in a negative equity situation. This will keep inventory low because homeowners won’t sell if their sale price will not cover their mortgage payoff plus costs of sale. Low inventory will put upward pressure on prices in spite of the sluggish economy. Zillow also predicts that foreclosures will be a factor affecting Flagstaff home values for the next several years. Some people must leave their home even if they are in a negative-equity situation. Of course, some will be in a position to put cash in at closing and thus get out from under the mortgage without foreclosure, and short sale negotiations are still a possibility. The impact of foreclosures remains, but it’s not heavy compared with what we’ve seen since 2008.
Credit Suisse creates a monthly national survey of real estate agents, which has proved quite predictive over the years during which I’ve been following (and participating) in it. February buyer traffic was lower than expected: “Our Buyer Traffic Index slipped to 36 in February, from 38 in January—both levels indicate lower-than-expected traffic (50 is neutral). We typically see our February traffic index remain flat relative to January, whereas it fell two points this year. … Our index rose by only three points in January, relative to a typical eight-point increase. Now two months into the year and quickly moving into the middle of the spring selling season, we believe the impact from 2013’s sharp rise in home prices and interest rates is having lingering effects and the near-term demand environment will continue to underwhelm, especially for first-time buyers.”
Credit Suisse analysts blame low inventory for the decrease in buyer traffic. They say the market “has morphed from one where buyers want to grab what is seen as the last ‘suitable’ property to one … where, more often than not, those ‘suitable’ properties are difficult to find at all. In addition to causing buyers to just stay put, this lack of supply has also pushed prices to higher levels, where many buyers cannot [afford the properties available].” Bottom line in the Credit Suisse national outlook is for broad home price gains to continue but with “more muted appreciation in 2014, relative to 2013, based on the lower level of demand.”
The Phoenix real estate market is in flux. After the sharp rise in home prices last year, buyers seem to have less confidence and investors are less interested in the Phoenix market. Economic concerns and higher interest rates have put some buyers who were working with Phoenix-area agents on the sideline for now, according to the Credit Suisse survey. RE/MAX regional reports concur that the Phoenix market, which via traffic and second-home interest has an impact on our Flagstaff homes market, is not as strong in 2014 as it was last year.
In Flagstaff, we are seeing these national and regional trends result in the all-to-familiar Flagstaff Squeeze (my term): The low-end of the Flagstaff home market is very competitive, pushing up prices and making new listings disappear under contract within 24 hours. Meanwhile, the market in the higher ranges is slow. See the price range home sales chart in my Monthly Flagstaff Home Sales Report, to be posted tomorrow.
We’ll see what spring brings. If this is the year when your personal situation indicates a sale is in order, give us a call for specific advice. 928.714.0001.
If you’re someone hoping to buy a Flagstaff home in 2014, likewise give us a call, or start with Flagstaff’s best real estate website.