POVERTY WITH A VIEW: Flagstaff real estate agents discuss city’s current market

A market review from the Northern Arizona Association of Realtors (NAAR) reported that the median sales price of residential homes in northern Arizona was $528,500 in June, compared to a median price of $612,000 in Flagstaff. It also reported 261 new listings and 2.7 months of supply in Flagstaff’s inventory, both up from the previous June (which had 212 new listings and 1.6 months supply), when Flagstaff’s median sales price was $620,000.

Flagstaff’s peak over the past year was in October of 2022, with a reported median sales price of $685,851, which dropped to $482,500 in November, the year’s lowest. It’s been rising at a varied rate since and has now returned to a similar price as the prior year.

NAAR President Jessica Garard, who’s been a Realtor for 17 years, said Flagstaff’s housing market has slowed a little since last year, when intense competition meant higher prices. Prices are mostly staying steady, she said in July, due to low inventory and fewer buyers — though they’re still high overall.

“Flagstaff has always been one of the more expensive places in Arizona, but the COVID market really spiked our prices,” she said. “We’ve come down a tiny bit since then, but we’re definitely not near pre-COVID days.”

Michelle Linton of Linton Real Estate, who’s spent 20 years as a Realtor, similarly said Flagstaff’s market was less competitive than last year, adding that higher interest rates mean buyers are getting less house for the same price.

“We’re still having a strong selling season,” she said in late August.

She added that there were 236 houses on the market, from a $59,500 manufactured home on leased land to a $6,495,000 home in a gated community.

“Right now, we have 195 homes in our contract for this month, we’re up 44% compared to last August,” she said. “When the rates started to go up, people really froze, but now the market’s moving on.”

She said this market was good for first-time homebuyers, who will have less competition than last year and might find sellers more willing to negotiate. She also said Flagstaff’s luxury market and gated home communities were selling faster than homes priced at $750,000 or less, because of buyers coming from other places who were able to pay cash.

Flagstaff home prices have generally trended upward since January 2020, according to NAAR’s market snapshot, while the median number of days on the market has trended downward.

A housing report from Arizona Realtors (AAR) for June 2023 lists a statewide median sales price of $365,096, which has risen each June since at least 2020, when the median price was $246,000. This June’s median price was 4.8% higher than in June 2022 (which reported a median price of $348,000).

The AAR report notes that inventory still shows a seller’s market, as six months of supply is considered a balanced market: the state had 3.2 months of supply in its inventory in June, up 13% from last year.

This year, Garard said, the factor most affecting local homebuying is federal interest rate hikes — which mean homeowners are less likely to sell and switch to a loan with a higher interest rate.

That then lowers the inventory of available housing.

“If you are currently in a home with a 3% rate, it’s really hard to justify selling that and getting into a loan that’s between 6 and 7%,” she said. “That’s what’s really affecting our inventory right now — is that I feel like a lot of those sellers are holding off until the interest rates drop.”

Garard said that in the second quarter of 2022, 326 single-family homes were sold in Flagstaff, compared to 202 in the second quarter of 2023, a change she said comes from supply and interest rates.

“We’re still seeing homes that are priced correctly get offers and go pending right away, so a lot of buyers that were holding off are succumbing to the industry because they need to be somewhere,” she said. “Interest is still keeping our inventory really low. It’s not just Flagstaff, it’s really happening nationally.”

Susan Weitzman, who owns Linton Real Estate and has been a Realtor for 43 years, focuses on commercial real estate and says Flagstaff also has a shortage of warehouses and industrial land.

While she said Flagstaff’s home prices “just keep going up and up and up,” Linton still advised residents to buy, once they were financially ready.

“Is it a good time to buy? Yes,” she said. “Because at least you’re investing in yourself and not giving that money to landlords, so I’d say it’s always a good time,” she said. “But you have to be careful; like can you make your mortgage payment? Even though a lot of Realtors will advertise, ‘date the rate, marry the house,’ that’s not true. What if the rates don’t go down?”

Garard said she thought Flagstaff’s market for houses could stabilize on its own, though it would take some kind of additional effort to bring down prices.

She isn’t sure what that might look like, however.

“Flagstaff is just so tricky because we’re landlocked,” she said. “ … We can’t sprawl, we don’t have as much land [and] our supply’s always going to be limited, which is always going to keep our prices higher.”

She added: “Phoenix honestly has been growing like crazy and we all know the summer’s really intense with the heat, so our second-home market is always very strong with the job growth coming up in Phoenix. A lot of those jobs will bring people that will want second homes, or a second home on the mountain. That will actually likely keep our prices higher than most of Arizona.”

Linton also said Flagstaff’s main problem with housing is a lack of supply, which has been the case since the 2008 recession.

“We really need the government, the city, to build homes; we need to find a way for it to be easier for homes to go through the city process for permitting.  … That needs to be simplified and we need to invest in affordable housing,” she said.

To do that with limited land, Linton said, “we have to go up,” with Weitzman adding that the city also needed infill. 

While both cited the proportion of student housing projects to other types of development as part of the problem, Linton said student housing was still needed — “they’re all leased up, I hear,” she said.

One project they saw as successfully adding affordable housing as well as savings for residents was Habitat for Humanity of Northern Arizona’s starter homes.

Without some additional solutions, which she noted the city was already trying to find, Linton said she expects Flagstaff’s home prices to continue rising.

“Phoenix is only getting hotter and more crowded, and they’re all coming this way,” she said. “So then it puts us in a tricky place where we’re going to become an Aspen or a Telluride and then it’s going to be hard for people to work at coffee shops, teachers, our hospital workers. … It’s already hard for Flagstaff Police Department to recruit and retain people because the cost of living’s so expensive. We need workforce housing, affordable housing.”