Arizona’s Luxury Home Market Is Setting Records
Arizona’s luxury home market has always been famed for its jaw-dropping desert mansions and global appeal. But 2020 has seen the scene reach new heights as our luxury real estate market set records despite the pandemic panic.
Arizona’s Luxury Home Market Outlook
The growth in Arizona’s luxury home market peaked with the state’s highest-priced home sale of $24.1 million for a mansion in Scottsdale in September 2020. This home sale beat the previous record set by Phoenix Suns owner Robert Sarver’s Cameldale estate, which sold for $19.5 million in 2018. These monumental sales have ushered in a new standard for Arizona luxury home prices; seeing price tags like these has become the new norm.
Phoenix and Scottsdale in particular are leading the pack, ranking as the top luxury markets in the state as well as setting new records. The number of $3-$4M sales in Scottsdale increased by 82% through October 2020. In Maricopa County, where these markets are found, sales of homes over $1 million have increased 50% year-to-date through October as well.
De Melo was unsurprised by these staggering figures, given how busy he’s been over the past year.
“The numbers worked, and we didn’t have any slow down on our end [last year],” he said. “The unfortunate pandemic was the best year we ever had. Our numbers were through the roof… [and] it really didn’t slow down here. Appreciation is through the roof. Overall appreciation is somewhere north of 20% annually, which is insane.”
Arizona Luxury Home Trends
Luxury home trends shift to reflect the changing demands of their audience. Over the course of the past year, homeowners’ needs have shifted significantly, and a renewed emphasis on the functionality of the home has created a demand for bigger abodes with greater amenities.
De Melo agreed, emphasizing that while Arizona’s luxury housing was already performing well before the pandemic, the drive for more space has unleashed the heat in this market.
“I think [Arizona’s luxury market numbers come down to] two things... [the] demand for modern and contemporary housing is definitely going up, but [that upward trajectory] has been a trend for a while. Hand in hand with that is also the size of the homes within the luxury segment,” De Melo reported.
With this in mind, let’s explore the trends in Arizona’s luxury market to better understand why this scene’s heat is expected to keep burning through 2021.
Affluent homebuyers are transitioning from urban dwellings near retail amenities to larger homes outside of cities that are more often than not in rural areas, ideally sitting on multiple acres of land.
De Melo has noticed the shift in priorities, even going so far as to say that there’s a new industry standard to keep in mind.
“We used to say the sweet spot for housing was under 7,000 sq. ft., and now all of our projects are over 7,000 sq. ft. with the largest being 11,000 sq. ft. You see the demand for bigger houses, more amenities, more flex space, and gated [communities] as well. The premium that someone is willing to pay to have these boxes checked off in this new world is clearly visible,” he said.
More Multi-purpose Rooms
Since COVID-19 forced all of us to stay inside for over a year, homeowners had to get creative with the amount of space they had available. As luxury buyers sought new properties to call their own, the need for more functional, transformative spaces rose to the top of their must-have list.
“Maybe [the homeowners] want his or her office space, they want the gym/flex-room that people want to use for living purposes. More garage space, movie theaters (which were kind of a thing of the past) are coming back,” de Melo said. This fresh emphasis on multi-purpose rooms that could also serve as amenities kept luxury buyers hungry as they sought the perfect palace in which their every need could be covered from the comfort of home.
Higher Price Per Square Foot
As land prices rise and building materials become more expensive, so will the price per square foot of a home — which is great news for luxury real estate agents “$1,000 per sq. ft. and up has become the new standard...This is within the luxury market, but this is normal,” de Melo said.
To put this into perspective, the average cost per square foot in Arizona is $170. This acceptance of paying sky-high prices demonstrates just how badly these luxury buyers want homes in Arizona and are willing to pay a premium for their dream property.
Arizona’s Luxury Home Market Forecast
2020’s frenzied demand for high-end homes created a competitive market that lent itself well to sellers in the market. Nearly 605% of homes in Arizona have sold above the listing price year-over-year, creating a strong seller’s market that’s projected to continue through 2021.
De Melo’s outlook on the future of luxury real estate is bright.
“I think overall, we’re in great shape over here. Considering all economic factors and market indicators, I do not see a big slow down [in demand], especially when you have a brand new or fully renovated product… We’re building [currently] and pre-selling. We have 12 projects, all around 7,000 sq. ft., and every one is pre-sold already,” he said.
Even with lower housing inventory levels, demand for luxury real estate remains steady, making experts in Arizona’s housing market confident that 2021 will be another busy year.
Working in the Luxury Home Market
Are you daydreaming about touring and selling impeccable luxury properties? Becoming a luxury real estate agent isn’t impossible, but it does take a lot of hard work and dedication to serve clients whose time is quite literally money. Mastering this market requires significant patience and a solid work ethic to reach your goals and succeed.
De Melo had the following nuggets of wisdom to offer those looking to break into this lucrative niche.
“Starting out, we didn’t know anything. Sometimes, starting out and not knowing can be an advantage — being able to see things differently [is an advantage]. Working hard and doing what we love has helped lead to our success,” he said.
Additionally, a good work ethic will help you stay focused on your goals, leading to smart decision-making regarding networking, investing, and/or making strategic changes.
“Building capital through initial investments can help you make moves down the line that leads to bigger and more expensive projects. Our first deal was a $90,000 townhome — we had to start somewhere. From there, we learned about the investment side and fundraising,” he said. And clearly, his strategy has worked. Today, America One Real Estate regularly sells luxury homes for $5 million or more. In 2020, the group closed 80 transactions to the tune of $82,824,668 in total volume sold.
De Melo’s rise to success has been steady, having 10 years of experience in the Arizona housing market. But working hard and earning each win was key to his business’s success, he says. Entering the scene as a young gun from Germany, there was plenty of doubt about his vision, but through hard work and dedication, America One Real Estate has reached new heights right alongside the Arizona luxury market.