A tale of two cities (Part 1)

City #1 is Queen Creek. Let's look at the amazing rise and fall of house prices in this city. Queen Creek is one of two cites being profiled because it stands out as one of the worst examples of rapid depreciation in our area.

Here are some population highlights taken from the cities website today:

Queen Creek started it's rapid growth in the early 2000's because houses in that area were generally less expensive than in other parts of the Valley. That changed in 2004-2005 during the now famous "housing boom." During the boom, houses in Queen Creek were comparable in price to houses everywhere in the Valley. However, many people still moved there because they had a greater chance to buy a home. The reason: a majority of Valley residents thought Q.C. was too far to drive and elected not purchase in this city, thus less competition from other buyers.

Here are some recent stats on single family residences in Queen Creek:

You can see a $30,941 drop in the average price over a 6-month period. What is more telling is the $18 per-sq ft drop to $80 per-sq ft (for a more detailed explanation of why sq ft is more accurate). If we use $80 and apply it to the average home that sold in November (2,126 sq ft), we see that $80 X 2,126 sq ft = $170,080. Essentially that means that the same size house would actually sell for $37,777 less ... not $30,941.

Now let's look at prices during the boom:

Note that prices in Q.C. peaked at $159 per-sq ft in November of 2005. This next analysis will jolt you more than slamming 3 energy drinks: those 1,923 sq ft homes that sold for $306,642 in November of 2005 are now selling -- at $80 per-sq ft -- for $153,840. There is no commentary I need to write about this because the numbers speak for themselves. I know it's popular opinion that we have not hit bottom -- but at $80 per-sq ft -- prices were at this level BEFORE the boom.

There is only one city that has worse numbers than this. Part 2 of this post will detail that city. What's your guess? (see Part 2 for the answer)

Comments

[Nancy]

Maricopa

[Ron]

Bulls eye, Nancy.

[FB]

prices were at this level BEFORE the boom.

Care to supply proof? What was the price per square foot in 1995 and 2000?

[W.C. Varones]

$80 per square foot?

Can you even build for that? Even with shoddy construction and illegal alien labor?

[Ron]

FB,

Thanks. Check the post for May 12th for my reply.

[Ron]

W.C.,

Good point. I don't have access to that insider info. I can tell you that any of my clients who have asked me about "buying new" always change their minds after seeing the "resale" prices.

[Bob N]

The question is NOT if you can build for $80 / square foot. Welcome to economics, and supply and demand. Housing prices in areas with huge oversupply will probably go well below construction costs.