October Flagstaff Real Estate Report

Time passes, the market changes, even in Flagstaff. Numbers for the third quarter of 2007 give a quite different impression from the second quarter results reported in the space in July. For the second quarter of 2007, compared to 2006, median prices were about even. Sales volume, however, was down. We see the market response to that in the third quarter comparison – prices are down.

I present statistics in two separate tables because of the difficulty in comparing this year’s market to last on an overall basis. The difficulty in comparison is caused by the entry of apartment conversions – a new housing product – into the Flagstaff market. These apartment/condos are smaller than most anything previously seen in Flagstaff and have been sold in large numbers at prices much lower than the lowest price available in recent years for other types of homes. The effect has been to reduce the average and median prices in the Flagstaff market below the prices of two years ago; however, the price per square foot is higher than in 2005.

Here is what this looks like. Numbers for the overall market are in the first table while the second table includes only single family, free-standing, residences. These numbers include only sales reported in the Multiple Listing Service of the Northern Arizona Association of Realtors^® and include any units with Flagstaff mailing addresses, whether inside the city limits or not:

The median price for the overall market shows such a dramatic drop because of the number of smaller condo units that have sold – products that were not available for sale last year. In contrast, there is almost no change in the median price of single family homes. If one looks at the price per square foot there is a 4% drop in price for single family residences since last year, but we’ve not hit the lower price per square foot of 2005. Therefore, homeowners who purchased at least two years ago still have experienced a slight increase in equity. 

In sum, the sellers should plan to price slightly below last year’s comparable sales in order to get their homes sold. Looking at the days on the market also shows that sellers should expect that it may take some time to sell their homes; however, pricing is key. Homes priced competitively are still selling quickly. The increase in the days on the market from listing to sale compared to last year is dramatic and will continue to press prices down as sellers adjust their expectations on price as they confront the reality of supply and demand. Still, we have a ways to go before sellers who have owned their homes for two or more years are likely to lose equity on a sale.