High-end million-dollar luxury properties are at substantial risk for additional price declines.

July 2008 – Custom, million dollar luxury homes represent the weakest segment in the Phoenix housing market and are likely headed for additional price declines. This decline is part of an evolving market trend that is slowly resolving pricing inequities in the housing market for the Phoenix area.

In terms of closed sales, the number of transactions for homes priced above $1,000,000 is shrinking in absolute terms and as a percentage of total sales:

2002 – 0.68%, 465 properties (Normal Market) 2003 – 0.74%, 594 properties (Normal Market) 2004 – 1.1%, 1,041 properties (Accelerating Price Appreciation) 2005 – 1.7%, 1,938 properties (Rapid Price Appreciation) 2006 – 2.7%, 1,992 properties (Transitional Market) 2007 – 3.2%, 1,737 properties (Declining Market) 2008 – 2.3%, 582 properties YTD (Declining Market)

Sales for 2008 are clearly down from 2007 figures and as a result, the competitive environment for homes above $1,000,000 is intensifying. The market may be seeing an overall corrective trend in that the percentage of luxury properties sold each year is recalibrating more closely to 2004 levels. This change will create significant pressure for prices to dip further as sellers will be forced to adjust to the realities of the market in order to successfully sell their homes.

In terms of pending sales, “absorption,” as measured by the percentage of available homes currently under contract, continues this trend:

Only 5.6% of homes priced from $1,000,000 to $2,000,000 are currently under contract. Only 3.3% of homes priced above $2,000,000 to $3,000,000 are currently under contract. Only 3.5% of homes priced at $3,000,000 and above are currently under contract.

This lack of activity at the high-end of the market translates into the overall performance of specific communities in the Phoenix area.

Scottsdale and Fountain Hills, known for their affluent lifestyles and higher cost of living, are two of the weakest markets in the Valley, each averaging about 10% of available properties currently under contract.

Compare that to Chandler, Gilbert, Ahwatukee, and Glendale that average 16% to 21% of homes currently under contract. Maricopa, Surprise, and Queen Creek, much more affordable markets, lead the market due to buyer interest in the large numbers of foreclosure-related properties there.

But this isn’t all bad news depending on how one looks at it.

The changes be a sign that the market is slowly working to resolve pricing imbalances and is actually a very positive trend in the long-term–though it won’t feel that way for many in the short term. In the meantime, there will be more opportunities for buyers to get fantastic properties at improved prices.

What do you see when you see pink? It says “girly” all over, right? It becomes a place where men are off-limits. Before black was the color of trend, girls preferred pink. It is bold and has a statement that you cannot deny. It says sassy, sophisticated, and feminine. This is what the color pink used to say but did you know that pink is not really a statement for girls? It was originally a color for masculinity and blue was the color for femininity. But since people from time had made pink a statement for girls, the story had been turned upside-down. Now, when you see men in pink, you’ll just find it absurd. But hey, if was originally for girls, then, it wouldn’t be impossible that boys would someday have their own definition of a “chic” apartment, too.