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Swelter in Place: COVID-19’s Impact on the Phoenix Luxury Home Market

Thanks to the economic boom, Greater Phoenix home sales in the $500,000-plus range have been robust over the past few years. Like nearly every sector of the economy, however, the effects of COVID-19 are silently spreading into the luxury real estate realm as well. Depending on the specific price range, we are generally seeing growth in active listings, while the mid-month closings for May indicate the number of sales will drop further from the levels we saw in March and April.

Luxury Home Closings in Maricopa County

Price Range March April Through May 14
$500K-$1M 1,030 775 189
$1-$2M 197 145 26
$2-3M 44 19 3
$3M+ 22 14 2

In particular, homes in the $1-2 million range seem to be sitting on the market for longer periods. Why would this be the case? These are often homebuyers who still need to borrow to purchase a home—unlike many buyers in the higher brackets—and jumbo loans are hard to find currently, as discussed in our recent post, Financial Focus: Securing a Mortgage During COVID-19. In addition, this segment may be more sensitive to what’s happening from an economic standpoint: upper managers concerned about job security or business owners wrestling with revenue decreases. Until the smoke clears, they’re simply staying put.

Nonetheless, every market presents opportunities for both buyers and sellers. For buyers who are well capitalized and not as dependent on financing, the softening of sales and uptick of supply may provide more negotiability. Also, because the usual strong spring season did not occur, we may not experience the normal pattern of properties going off market after Memorial Day.

For sellers, there is still a window of opportunity—based on high comparables and relatively low supply—that may be closed in another 6 months. Note that the luxury homes that are selling well in Phoenix are those that are tricked out and have been completely renovated. There is little appeal in taking on a remodeling project when there’s a risk of your contractor going out of business before the job is complete, or cost-overruns when consumers are really buckling down.

The final factor, which impacts both buyers and sellers, is that many owners and renters of out-of-state second homes may need to stay put. Areas such as Coronado are requiring 14-day quarantines, resulting in canceled leases and more people hanging tight in the Valley heat. That could mean more would-be buyers staying home, as well as more sellers needing to wait till the fall while they swelter in place.

Whether you want expert guidance in finding your dream home or downsizing into the perfect property for your lifestyle today, contact R.O.I. Properties at 602-319-1326, or info@roiproperties.com.

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