Gilbert covers a large area of land in the far southeast Phoenix valley. It’s the furthest community from central Phoenix but offers plenty of amenities and options for residents - with more shopping, dining and recreational attractions seemingly popping up over night. In fact, Gilbert is the fastest-growing big suburb in America, absorbing many of the 115,000 net people that moved to Phoenix in 2006!
With so many people moving to Gilbert one might think that the real estate market may have fared a little better compared to other locations in the Phoenix valley. Unfortunatley, that is not the case. Gilbert is home many new home builders with swaths of land ready to add thousands of new homes. This meant a few things for Gilbert over the past two years:
- Because new home builders have much deeper pockets than traditional home sellers, they were able to compete by dropping their prices to make their homes cheaper than resell homes.
- As a result, traditional home sellers - even those who may have purchased the home as a new build a year prior - have had to drop their prices to compete with the glut of new homes (that is, if they wanted to actually sell their home).
- Because new home builders also offered “Zero Down” financing, many new home buyers have found themselves with negative equity if they bought at the height of the real estate market.
- The end result is that home prices in Gilbert have declined dramatically over the past two years like most of the Phoenix real estate market.
Just how much have prices declined? The following graph shows the average prices for homes listed in the Arizona Regional Multiple Listing Service:
Two-Year Pricing Statistics in Gilbert, Arizona. Click to enlarge.
You can view the raw data for this article here.
In the graph above:
- the blue line indicates the average price of single-family homes currently listed in Gilbert.
- the green line indicates the list price for single-family homes before being sold. In other words, this is the average price for all listings that went under contract before the final sales price was agreed upon by the buyer and seller through contract negotiations.
- the yellow line indicates what the average sales price was for single-family homes in Gilbert.
Like much of the Phoenix real estate market, Gilbert’s prices really started to decline in the last quarter of 2007 and have started to stabilize over the past three months. From a height of $367,183 in December of 2006, the average sold home now sells for $274,340 in Gilbert.
As in our previous analysis of Tempe and Chandler, Gilbert’s homeowners may be facing negative equity positions. Take this simple example:
If Average Joe purchased a home in December 2006 for the average selling price of $367,183 with 20% ($73,437) down, he would’ve taken out a mortgage for $293,746. If his home’s value was July 2008’s current selling average of $274,340, he’d have a negative equity of $19,406. If Average Joe’s home appreciates 5% a year, on average, his home will be able to sell for what he purchased it for in six years.
This, of course, is a very ideal situation. It’s assuming Average Joe put down 20% and we are at the bottom of the pricing declines as of July 2008. Still, in this more-than-ideal situation, Average Joe won’t be able to sell his home for the same as he bought it until July 2014. But, Average Joe shouldn’t have too many worries if he actually purchased his home to live in and plans on being in it for the next seven to ten years.
In terms of the percentage of decline year-over-year, here’s what average selling prices in Gilbert have done over the past year:
The percent change in single-family home prices in Gilbert, Arizona over the past year. Click to enlarge.
Taking in these two pieces of data - average selling prices and year-over-year-declines - a few things should be noted:
- Average selling prices in Gilbert, Arizona’s single-family home real estate market appear to be stabilizing.
- The average selling price has been in the high $270,000’s since March 2008.
If prices appear to be stabilizing, then how long are homes sitting on the market in Gilbert? Take a look at this information:
The Average Days on Market For Single-Family Homes in Gilbert, Arizona. Click to enlarge.
As in Tempe and Chandler, late 2007 and early 2008 saw the longest time period. Maxing out at 120 days in February 2008, the ADOM in Gilbert has been flirting with 100 days since March of 2008. The spike in January and February 2008 could be attributed to the “slow season” of real estate. On average, however, Gilbert’s ADOM has been prety steady throughout the two-year time period at about 97 days. This could be a result of Gilbert’s fast-growing nature discussed earlier.
And, drum roll, please … let’s look at the inventory levels in Gilbert. As always:
- Less than six months of inventory indicates a “seller’s market.” In a seller’s market there are more buyers than there are homes to purchase. As a result, real estate prices may increase during a seller’s market because there is less inventory than there are buyers. This is what happened during the 2004 - 2006 real estate boom in Phoenix.
- More than six months of inventory indicates a “buyer’s market.” In a buyer’s market, real estate will often sell below the listing price because there are more buyers than inventory. Much of the country has experienced an extreme buyer’s market over the past year or two.
- Six months of inventory indicates a “balanced market.” This is the most desirable market for buyers and sellers alike. Homes will typically sell near listing price because there is a balanced amount of inventory when compared to buyers. Sellers who market their property correctly and at the current market price will often receive an offer near that list price. Buyers are more confident in purchasing because prices are stable or appreciating.
Here is where Gilbert’s single-family home market stands:
The inventory levels in Gilbert, Arizona's single-family real estate market for the past two years. Click to enlarge.
July 2008 reached the magic number of six months! In fact, a full month of inventory was dropped from June 2008 to July 2008 (7.2 months to 6.2 months). Gilbert has been returning to a balanced market as of late. It should be noted that May, June and July are often brisk real estate selling months as families use summer break to move and relocate. It will be interesting to see what August 2008 brings.
There are still outside factors that can’t be controlled for all of the Phoenix Valley’s real estate market. Those include foreclosures and the credit-crisis. Many news reports have indicated that foreclosures have peaked in Phoenix - which is a good thing. As the foreclosures on the market are bought up prices can continue to stabilize. The credit-crisis continues to be a big factor in the real estate market as buyers are finding they can’t get approved for mortgages even with decent credit.
And with the recent changes in FHA Mortgage Loans that take effect on October 1, more buyers may be pushed out of the market. Currently, a buyer needs 3% down for an FHA mortgage. On October 1, that requirement increases to 3.5%. The larger concern, however, is that FHA will no longer allow sellers or home builders to gift the down payment - which has been a key selling point for builders over the past few years with “zero down” offerings as well as for motivated sellers to get their home sold.
Overall, the single-family real estate market in Gilbert, Arizona appears to be stabilizing. Average prices have stabilized in the high $270,000’s since the second quarter of 2008 while inventory levels have stabilized to just over 6 months in July 2008.
If you’re interested in purchasing a home in Gilbert, you can search our site casually or set up a fusionpower search - giving you a powerful personal and secure webpage with homes that meet your search criteria!
