Published August 27, 2024
Land prices are soaring in the Valley's luxury market. Here's where values are headed
Land prices are soaring in the Valley's luxury market. Here's where values are headed
Land prices are through the roof in some of the Valley's luxury residential markets, according to research conducted exclusively for Phoenix Business Journal.
Looking at land prices over the past three years, J. Andrew Turley, president of Phoenix Valuations, found land prices doubled in Paradise Valley and the Arcadia area of Phoenix for parcels that were 2.5-acres and smaller.
"It all comes down to the same tried and true fundamentals; inbound migration of the wealthy and local job economy," Turley said. "Paradise Valley and the surrounding market area of Scottsdale and Arcadia is the No. 2 destination for the ultra wealthy migration patterns, second only to South Florida and Miami."
The Paradise Valley market has become a national and international magnet for homebuyers, Turley said.
In 2023, vacant lots in Paradise Valley sized smaller than 2.5 acres sold for an average of $3.18 million, compared with $1.52 million in 2020, Turley said.
The number of days on the market in 2023 for those lots was 113, compared with 167 days in 2020.
Click on the gallery below for a breakdown of price increases in the Valley's most-popular luxury markets:
The average price of vacant land parcels up to 2.5 acres in the Valley's luxury markets, according to research conducted by Phoenix Valuations.
With an increase in land prices comes an increase in home prices.
"When you are paying $3 million-plus for a good lot in Paradise Valley, it changes who can buy," said Rod Cullum, president of Scottsdale-based Cullum Homes custom home builder. "The starting price of a new home in Paradise Valley on an acre has jumped to $10 million-plus. It was just a few years ago that $5 million would buy a new home on an acre in Paradise Valley."
Paradise Valley plot sells for $42 million
Scott Grigg, owner of Grigg's Group Powered By the Altman Brothers luxury brokerage, has a front-row seat in seeing how rising land prices drive up home prices.
"Our cost to build remains relatively the same," he said. "However, the land costs have doubled over the last year, which is increasing the overall pricing. As a buyer, you're looking at a minimum of $3.5 million for a flat 1-acre lot with a view in Paradise Valley."
In December 2023, Grigg sold a 2.98-acre vacant parcel in Paradise Valley for $3.399 million, representing the fourth time he has sold that vacant lot.
In January of 2024, a California investor sold a 1.05-acre vacant lot in Arcadia for $5.2 million, after buying it for $4.75 million back in 2022.
Then the whopper of them all closed four months later.
On April 19, a 27-acre vacant parcel in a premier area of Paradise Valley sold for $42 million, representing the largest parcel of undeveloped land in Paradise Valley. That's up 600% from the last time it sold for $6 million in cash in 1997.
In July, custom homebuilders garnered 293 permits, up from 210 in July 2023, according to the latest Phoenix Housing Market Letter published by RL Brown Housing Reports.
Together, custom homebuilders secured the most number of permits in July, with D.R. Horton Inc. nabbing 231 — the most from a single homebuilder.
Custom homebuilders also closed on 99 homes in July, up from 75 in July 2023, according to the Phoenix Housing Market Letter.
Luxury custom home market stable
"The custom home market continues to be very stable in any market condition in our area," said Jim Daniel, president of RL Brown Housing Reports. "I will say some of the sales prices for both lots and homes have been shocking, to say the least."
New home sales continue to be the lone bright spot in the housing market, according to Daniel Vielhaber, an economist for Nationwide.
While mortgage interest rates have remained elevated over the past couple of years, homebuilders have been able to offer rate incentives to buyers, Vielhaber said in an Aug. 23 market report.
"These dynamics should continue until mortgage rates fall to a level that is less cost prohibitive on the existing side of the market," he said.
The 30-year fixed rate mortgage is lingering just under 6.5%, according to Freddie Mac's latest update on Aug. 22.
For the highest-priced homes, buyers tend to not worry about interest rates by plunking down cash. In fact, Turley said two-thirds of buyers over the price point of $4 million generally are cash buyers.
Even so, luxury buyers are still impacted by interest rates, Cullum said.
"Not so much from a mortgage perspective, but their investments and businesses are impacted," he said.
While homebuilders offering more affordable product are beginning to see more buyer interest, Cullum said the ticking down of interest rates hasn't caused additional interest from luxury buyers.
"The high end market is usually quiet in the summer heat," he said.
Final Thoughts:
Luxury land prices in the Valley are hitting new heights, redefining who can call Paradise Valley or Arcadia home. With million-dollar lots and skyrocketing home prices, the market is attracting a wealthier crowd. But it’s not just about numbers—it's about the lifestyle, the exclusivity, and the unmatched views. For those considering a move, this isn't just a trend; it's a chance to be part of something extraordinary in one of the most sought-after communities in the nation.
