The median resale home price in Watts — the downtrodden Los Angeles neighborhood that was the scene of one of America’s worst riots 40 years ago — is higher than the median resale home price in Gilbert.
Figures from dataquick.com show the median price in Watts at the end of 2004 was $225,000. For Gilbert, the Arizona Real Estate Center pegged the median resale price at $205,000.
I bring this up to give some perspective to a couple recent developments — Glendale apparently snatching another high profile event from our side of the Valley, and a report from the Arizona Real Estate Center that shows housing prices are stretching the limit of affordability.
Two factors have driven our current real estate boom and the phenomenal growth here since 1950: Our lovely climate and our relatively cheap land.
Despite the recent rains and the run up in housing prices here, neither of those elements is going away.
Still, a couple of our East Valley municipalities and the real estate industry may be — to some degree — victims of their own success.
First the cities. In 1970, Tempe and Scottsdale had populations of around 60,000. Today Tempe is 160,000 and Scottsdale is 220,000. Both cities are approaching build out. Most of the cheap land has been snapped up and developed. There just isn’t much room available.
Meanwhile, Glendale is crawling with undeveloped land. When voters passed a bed tax in 2000 that would, among other things, fund a football stadium for NFL Cardinals home games and the Fiesta Bowl. Tempe wanted to keep those events. The Cardinals and bowl officials wanted to stay in Tempe. But Tempe couldn’t find an acceptable site.
Glendale had a spot.
Earlier, after developer and co-owner of the NHL’s Phoenix Coyotes hockey team Steve Ellman spent a couple years wrangling with Scottsdale over building a sales-tax subsidized arena at the former Los Arcos Mall, the building ended up in the West Valley. Glendale, which had available land, had some cash and was desperate for cache, offered to front Ellman the money for the arena.
Now Ellman, who bears no love for Scottsdale, says he’s near a deal to move the Barrett-Jackson Classic Car Auction, a Scottsdale staple since 1971, to his Glendale Arena. The auction has outgrown its digs at Westworld, Scottsdale’s equestrian park.
There are consolation prizes in this competition that may make us in the East Valley the real winners. Tempe wound up with an IKEA at one of the proposed stadium sites. Because of Arizona’s quirky tax code, that giant home furnishing store likely will do more for city coffers than a stadium would. Instead of hockey rink at Los Arcos, Scottsdale landed a high-tech research park that has a great upside (although it requires a goodsized, up-front investment from the city).
The real benefit of the car auction for Scottsdale, which has enough of a name that no one event can really define it, is posh resorts filled with well-heeled bidders. There are no posh resorts in Glendale. The advent of the stadium, which is supposed to hold conventions, will lead to some hotel construction. But unless someone builds a major airport on that side of town, Glendale will never have a group of resorts like Scottsdale’s. The high rollers who want to bid on cars still will stay in Scottsdale.
For the real estate industry, the houses in the East Valley have been going faster than contractors could build them or agents could list and sell them.
Last week the Arizona Real Estate Center reported that prices were nearing the point where home buyers with median incomes in the Valley won’t be able to afford median priced homes. Rising prices and the threat of rising interest rates have cooled off home markets in other areas. I think that will cool the real estate market here — somewhat.
But remember this: The home market here isn’t fueled by people who are already here moving within the Valley. It’s fueled by people moving here from other markets. And Southern California refugees from Redlands or Rancho Cucamonga — if they had any sort of equity in their old residences — would find home prices here quite inviting.
Yes, we’ve about run out of cheap land in Scottsdale and Tempe. But there’s still plenty of untapped inventory to the south and east — and of course out on the west side.