Flagstaff Market Report: What Market?

Is this a meltdown or a rebound in the Flagstaff Real Estate market? The results from November will probably be read both ways, depending on the “eye of the beholder” as the saying goes. Would be home sellers will, no doubt, take heart from the rise in average and median prices. But with only 30 homes sold in the month, and inventory remaining high, the supply of homes relative to sales (absorption rate) is setting new records.

Remember the law of supply and demand: If supply exceeds demand, prices must fall. Flagstaff’s real estate market seems to be trying to break that ironclad rule.

Here are the numbers for Flagstaff single family residences:

“MLS” data is based upon information from the Northern Arizona Association of Realtors^® and is deemed reliable for sales reported to the association, but is not guaranteed and does not include all sales in the market area. The reported data is for homes with Flagstaff mailing addresses, whether within the city limits or in the greater metropolitan area.

The November 2008 single family home sales ranged from $117,000 for a 2 bedroom, 1 bath, 840 square foot home to $1,050,000 for a 3850 square foot, 3 bedroom, 3.5 bath home on a half acre in Forest Highlands. There were two other Forest Highlands homes sold – one for $850,000 and one for $750,000. The latter was sold fully furnished. Homes sold scattered in the price ranges below that, with most of the sales in the $300,000 - $400,000 range.

Striking facts about these 30 home sales: Over 20% of them were by sellers with no emotional ties. Four were bank-owned (foreclosed or deed-in-lieu of foreclosure) homes and two were owned by relocation companies. Yet another was a short sale (sold for less than the amount owed to the bank). These are the truely motivated sellers.

The market for Flagstaff townhomes in November was even thinner than the market for single family residences. Only 3 townhomes sold, leaving 83 on the market at the beginning of the month for a supply of over 27-months’ worth. The median price was $262,500 – but with only a sample of three in the calculation of that median, I am not reading much into the sharp upswing from October’s median price of $218,000.

Forty-three Flagstaff homes of all types – single family, townhomes, condos, manufactured – sold in November. There were 832 homes on the market at the beginning of December. The supply of homes jumped from just over 13-months supply at the beginning of November to over 19-months’ supply at the beginning of December.

In other words, buyers are just saying “no” to the would-be sellers’ prices. Yet, new listings come on the market daily, and there are many price reductions daily. What’s happening to the others? They are dropping off the market. This “ghost” supply will slow the recovery in Flagstaff’s real estate market as the withdrawn listings return later when the market seems to be improving.

My prediction is that while some parts of the country are beginning to see a turn-around in the housing market, Flagstaff is in for a long delay before a return of prices we saw 2-3 years ago. On the other hand, buyers may not see prices much lower than they are now because Flagstaff sellers, apparently, can afford to wait.