Chandler & Gilbert - Two Valley Bright Spots

The Phoenix real estate market is very diverse as compared to other markets and each city that makes up that area can be very different from the others. For instance, drive around the more desert terrain of Scottsdale, Fountain Hills, Ahwatukee, and Cave Creek, and you will see desert terrain that is very different from one another. The same is true for the composition of each city in terms of development, employment base, etc. Having said that, we often look at the numbers for the real estate market on a wholistic level and though these tell a good deal about the overall market, they may also obscure the stronger performance of even more localized markets such as Chandler and Gilbert, which are two bright spots across the Valley.

Chandler and Gilbert are located east of Tempe and South of Mesa. Gilbert is further east of Chandler. The cities are very similar. Both have older parts to the north while the more southern areas were largely built out in the past ten years. Development in terms of retail and residential are very similar. Real estate in Chandler attracts a higher premium as Chandler’s location is more central and accessible to other parts of the Valley. Aside from that, there are a lot of similarities and crossover between the two cities.

In terms of real estate performance this year, we are seeing some interesting trends between them which will be broken down here. Let’s start.

In terms of Active (Available) properties, both cities saw inventory reach a low point in the September-October.

Chandler homes for sale - Available inventory hit a low of 1,765 properties in October, the lowest point since April 2006!
Gilbert homes for sale - Available inventory hit a low of 2,091 properties in September, the lowest point since February 2007!

This is actually an interesting development given the overall inventory picture. Overall Valley-wide inventory hit a low in September which was consistent with inventory in April 2007. By this, we see that Chandler’s performance here becomes more compelling.

In terms of Pending properties, both Chandler and Gilbert homes are showing strong gains over the same period a year ago.

In October, Chandler had 291 properties under contract for purchase vs. 233 the same period a year ago, a 25% improvement in pending properties! Chandler’s pending properties closely parallel activity seen in 2006.
In October, Gilbert had 245 properties under contract for purchase vs. 252 the same period a year ago, a 37% improvement in pending properties! In addition, Gilbert’s performance here is actually 11% better than even in 2006!

A separate figure to look at is “absorption” of inventory. This is determined by the following formula:

Add: # of Active (Available) properties + # of Active with Contingency properties (under contract) + # of Pending properties (under contract) = Total On-Market properties
Add: # of Active with Contingency + # of Pending properties = Total Under-Contract properties
Divide: Total Under-Contract properties by Total On-Market properties

The result here will be a decimal number that can be interpreted as X% of the total on-market properties are under contract, or “absorption.” Another way to communicate this is that for every 10 homes, there are X.X buyers.

Taking these into proper context of Chandler and Gilbert, here are the statistics.

Chandler absorption is at 16.2% of active properties, or for every 10 homes on the market, there are 1.6 buyers.
Gilbert absorption is at 17.7% of active properties, or for every 10 homes on the market, there are 1.8 buyers (rounded).

Both are showing stronger overall gains in terms of pending properties. Gilbert’s results point to a stronger sales picture here than even Chandler.

Now, it’s important to look at the impact of foreclosed homes in these local markets. Primarily, if we consider their percentage of total sales for these markets.

Both cities have seen a rapid onslaught of Real Estate Owned (REO) or “Lender owned” properties. And in fact, their numbers are closely tied. Both cities saw REO properties grow from approximately 7.7% of sales in January to approximately 25% of sales in October.

In terms of closed sales, results are mixed.

Chandler Year-to-Date Sales are at 2,821 properties vs. 3,494 properties for 2007.
Gilbert Year-to-Date Sales are at 3,108 properties vs. 3,158 properties for 2007.

From this, we can see that Chandler is lagging 2007 results which is a little surprising given the other activity. Gilbert is right on pace to exceed 2007 results which is consistent with the higher absorption rate. More absorption means more closed sales.

In summary, Chandler and Gilbert are two brighter spots in the Valley in terms of residential real estate sales activity. Gilbert seems to be faring better with stronger activity though Chandler clearly has some interesting results with regard to inventory. These are ones to watch going forward.

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