Wednesday, January 10, 2007

Phoenix High Rise and Lofts in 2007

It appears that, contrary to what the AZ Republic says, we have weathered the real estate duldrums of 2006 here in the fair city of Phoenix. All statistical indicators show that although sales volume was down compared to 2005 (volume was similar to 2003 which wasn't a bad year) sales prices still creeped up. This was not true across the board but in general.

However, I do see trouble on the horizon for the newly built and under construction high rise condos. With as much inventory on the market, or about to hit the market, one has to expect downward pressure on prices. The key will be whether or not the investors in these new buildings (by my estimates 30-45% of the total buyers) have the staying power to rent their homes out for a couple years rather than slashing prices to get out. In general, that is what happened at Orpheum Lofts and Optima Biltmore; the investors rented out their properties on the cheap just to cover some of their monthly outlay. The expectation is that within a year or two more they will be able to sell for a profit.

This strategy will work for the better buildings and will fail miserably for the others. Frankly, most investors will need help getting through the next couple years from someone who knows what the heck they are doing. The days of buying and flipping for big bucks are over; at least for now in Phoenix. Stay tuned for new tools coming to wku to help all you urban owners in 2007.

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