Insights, trends and expert answers on Real Property & Homes
By Terrance Thornton | Digital Free Press
The Arizona luxury real estate marketplace is a region few regularly traverse but at Russ Lyon Sotheby’s International Realty is Frank Aazami, who offers insight to what to expect as global headlines migrate toward illustrations of an unbalanced marketplace.
The Arizona Digital Free Press reached out to Mr. Aazami to better understand what economic factors are paramount as the Valley of the Sun heads into summer, federal interest rates continue to climb and inflation has become the talk of the town.
Founded in 1976, Russ Lyon Sotheby’s International Realty provides independent brokerages like Aazami Associates, which is based in Scottsdale, a marketing and referral partnership for luxury listings.
Mr. Aazami offered the Arizona Digital Press — and our readers — insights on all things luxury real estate. This is what he had to say:
Insights, trends & answers
• From your perspective, what shifts are you seeing here in the Phoenix metropolitan area, specifically the luxury Scottsdale markets?
Globally, it’s been a seller’s market for the last few years, characterized by critically low inventory and high demand. It’s now changing fast. Subsequently, all parties need to refocus, restrategize, so that sellers, buyers and, yes, agents, too, can achieve best-possible outcomes. Of course, you’ll still get good money for your luxury Valley residence and in good time, especially if it was built top tier and in a premium guard/gated community such as Silverleaf, with its McDowell Sonoran Preserve accessibility, amenity-rich clubhouse and championship golf.
• What do you make of the continued population boom here in Maricopa County?
People have been moving to Arizona in record numbers since air-conditioning came to the Valley around 1947. Ironically, that pace only accelerated in the COVID era. That trend promises to continue as people move from colder, denser populated areas to open golf spaces and Arizona sun. According to the most recent Penske 12th annual list of the country’s Top 10 moving destinations, Phoenix is third. We are now an A-list state, thanks to a positive business and tax environment.
•What reporting are you paying attention especially as the supply-and-demand equation continues to play out here in Scottsdale and across the Grand Canyon State?
One effective tool to accurately gauge the short supply and demand trends is the Cromford Market Index. An index score of around 100 represents a balanced market. Above 100 represents demand exceeding supply –– a seller’s market. By contrast, a CMI below 100 represents supply exceeding demand –– a buyer’s market. It’s important to note that the “smart guys” are seeing price stability after some softening. Buyers are not going to pay much more per square foot for existing homes, unless they are exceptionally finished in terms of structure, craftsmanship, millwork and materials.
•What is your gut telling you regarding some of the federal implications we don’t have control over?
Inflation is actually double digit, if the feds revealed the true numbers, and mortgage interest rates are quickly rising as the historic tool to stem the tide. That said, rates are still historically favorable, and many buyers in this niche pay cash for their homes. Those rising interest rates will be more of an issue in the new buyer and move-up segments. I am more concerned with what the stock and bond markets do. And I’m also more concerned about local and national politics, tax laws, for example, what policies are in play, and geopolitical issues such as the war in Ukraine and its effect on gas and grain prices and the confidence the well-off have in buying real estate or laying low for a while.
• What is happening on the ground level?
We have been experiencing this dramatic shift in the market, we are noticing high-end luxury new-builds in Scottsdale and Paradise Valley. While prices remain high, as the number of resale luxury homes for sale diminishes, builders and developers are realizing they can build exclusive homes in marquee communities for top dollar. One, in Paradise Valley, will feature over 30, $15-million-plus homes all within proximity to the Paradise Valley Ritz-Carlton development.
A distinct advantage for these investor/developers is they bought the land years ago at the right time, while buyers today are paying as much as double for the land. Those long-sighted savvy buyers are saying, “Let’s go ahead and build now.”
These luxury builds will carry innovative styling to meet the demands of deep-pocketed buyers; they’re tired of tired styles. Remember Tuscanmania in the 1990s and into the new century? Everyone was building them, and some of us were wondering even then why an Italian countryside style was trending in the Arizona desert. Some of these are still on the market after extensive listing. Following this phase, we had more contemporary. Now people are choosing blend styles such as Mediterranean.
•What are your customers looking for here in the Valley of the Sun?
Today’s sophisticated buyers want the highest level of finishes, millwork, cabinetry and flooring –– the kind they have in their exotic vehicles and yachts and on boutique ships and concierge-level resorts. They don’t choose just better, they choose best. For them, luxury isn’t a price, it’s an experience. It’s not just listening to a tenor; it’s listening to Pavarotti next to an ancient Roman building on a summer evening in Italy.
They’re also demanding top-flight interiors and technologies, including one-off lighting, music, security, unseen cameras and vents: the highest level of aesthetics and experience. Because of the pandemic, they want privacy, a big yard and space between their home and the neighbors’ homes, guard-gated camera security and concierge management service. The builders are putting the upgrade options out there. These people want it all, and they’re paying in excess of $1,100 a square foot for it.