With Scottsdale and Paradise Valley leading the way, Arizona became one of the seven states with over $1 billion in sales of luxury homes during 2005.
A study by Coldwell Banker on the nation’s hottest luxury home markets ranked Paradise Valley ninth among 75 cities in the United States, with $637 million in luxury home sales. Scottsdale ranked 10th with nearly $594 million in sales.
The two East Valley cities ranked highest in the increase in luxury home sales volume in 2005 compared to the year before. Paradise Valley increased 251 percent and jumped 43 places in the rankings, while Scottsdale increased 205 percent, rising 37 places from the 2004 standings.
The two were the only cities or towns in the top 10 outside California.
As with the rest of the real estate market, luxury homes were white-hot in 2005.
But the high-end segment was not driven by investors, said Bill Jilbert, Coldwell Banker Residential Brokerage president and chief operating officer.
“We were seeing some pent-up demand of baby boomers who were stretching their wings and buying more luxury properties,” he said
Besides Paradise Valley and Scottsdale, the top five cities reporting the largest increases in luxury home sales were Glencoe, Ill., Naples, Fla. and Phoenix, which rose 79 percent and is now ranked 69th in total sales volume. Phoenix rose 44 places in the rankings.
The study showed Arizona, Massachusetts, New Jersey, Illinois, Connecticut and New York joined California and Florida as states with more than $1 billion in luxury home sales.
Arizona, with a jump of 177 percent between 2004 and 2005, was one of the hottest markets in 2005, along with Kansas, which increased 309 percent and Idaho, up 189 percent.
Coldwell Banker considers houses valued at $1 million or more luxury homes.
Jilbert said Paradise Valley luxury home sales increased so much because there is no more land available in the town.
“A lot of the acquisitions were literally million-dollar tear-downs, where people were buying the home to knock it down to build a bigger and better home,” he said. Scottsdale is rapidly running out of developable lots, he said.
“We’re being fueled by limited supply and the anticipation of that supply running out,” he said, adding many people are drifting back to the Valley after living in northern parts of the state. “Families are raised and they want the conveniences of the city.”
The other element that drove the Valley’s luxury market was simply value, he said.
“When you compare the luxury home market in Paradise Valley and Scottsdale to Newport Beach (Calif.), New Jersey or New York, there’s such great value still even with the appreciation we’ve had,” he said.
“We were seeing some early retirement where people were buying that retirement home in anticipation of their retirement. These are obviously senior executives of corporations in anticipation of moving to Arizona,” Jilbert said.
Coldwell Banker said its 2005 total sales volume of luxury homes in the United States and Puerto Rico surged to a record $55.9 billion, surpassing its previous high of $45.2 billion set in 2004, a 24 percent increase.
The company said it and its affiliated companies nationwide participated in more than 31,000 luxury purchases or sales in 2005. The average sales price for luxury home transactions listed or sold by Coldwell Banker affiliated companies in 2005 was $1.79 million.
Unlike the cool-down in lower-priced homes, so far this year the market for luxury homes remains robust, Jilbert said.
“There still seems to be money flowing into it,” he said. “Some of it is step-up. It’s people who have just seen a tremendous increase in the equity they have in their current homes. If they’re able to sell that, they’re willing to step up to a bigger house.”