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From Wall Street to Main Street: Flagstaff's summer no meltdown, but not pretty

Restaurant owners, retailers, homesellers and car dealers had a down summer.

By J. FERGUSON
Sun Staff Reporter
Sunday, September 21, 2008

The numbers are in, and they show Flagstaff suffering through the slowest summer financially in five years.

Restaurant and alcohol sales were down 1.4 percent in July, only the second monthly year-to-year decline in five years. May and June weren't much better, up just 1.9 percent and 1.6 percent, respectively. Total retail spending was also down by 1.4 percent for the month of July compared to a year ago, led by sharp double-digit decreases in local construction and auto sales.

Through August, just 61 home-building permits had been issued, off by half compared with the first eight months of 2007.

The sale of single-family homes continued to stall in August, even though the median sales price dropped nearly 10 percent from the same month the previous year. There were 727 houses priced above $350,000 on the market, representing a 17-month backlog in that price category.

"I wouldn't be surprised if prices go into double-digit drops," said Stephen Brighton, a Realtor with Century 21 Metro Alliance.

Flagstaff's sagging real estate values have to be taken in context, however. In the Phoenix market, the August median sale price dropped by 33 percent to $193,500. Flagstaff's median sales price in August was $340,000, down $35,000 from August 2007, or 9.3 percent. More ominously, the price paid per square foot was down 17.4 percent to $174.

FEWER EATING OUT

One of the hardest hit areas in the local economy might be local restaurants and bars, which usually enjoy strong summer growth.

City Bed, Board and Beverage figures show revenues were down nearly $210,000 in July on more than $17 million in sales, the most recent figures available by the city.

The last time July restaurant and bar sales were lower than the previous July was in 1990.

Hotels and campgrounds saw a slight increase in BBB taxable sales of 1.8 percent in July, likely fueled in part by the opening of the 158-room Drury Hotel adjacent to NAU's High Country Conference Center.

Revenue per available room, known as Revpar, was up by 2.3 percent for July, affirming the city's BBB statistics.

Gross retail sales in July in Flagstaff of $183.2 million were down by $2.6 million, which translates into $27,000 less for city coffers compared to July 2007.

Construction in Flagstaff fell by more than 25 percent to $45.6 million and auto sales were down by more than 19 percent.

Steve Shafer, the city's chief tax officer, noted that many local construction firms are being forced to find work elsewhere.

"I noticed a lot of them were reporting taxes from out-of-town jobs," he said.

With July the first month in the city's fiscal year, the decline in sales tax revenue is at odds with a city staff projection of a 10 percent annual increase. The July figures also cast doubt on City Manager Kevin Burke's "market trigger" concept, which would give city employees a 1 percent raise for every 2 percentage-point increase in sales tax revenue above city projections.

The total number of building permits in the city through August was down by half vs. 2007, but the value was only down by $12.6 million, or 21.6 percent, thanks to new commercial construction.

SECOND HOMES NOT SELLING

In the local real estate market, there are 1,070 single-family homes listed for sale, according to figures released by the Northern Arizona Association of Realtors. That is a 13-month supply of homes on the market. A healthy market has a three- to six-month supply.

The problem is worse for higher-priced homes, with 727 homes listed above the current median price of $340,000, representing a 17-month supply. Of those 727, there are 318 homes listed above $600,000, according to NAAR.

Jim Snook, a real estate broker in Flagstaff, said he is seeing a stronger demand from local residents to buy a home, but mostly in relatively inexpensive homes priced below $250,000, of which there were just 63 listed last week.

"The golf-course, second-home sales are not happening right now," he said.

J. Ferguson can be reached at 556-2253 or jferguson@azdailysun.com.

Flagstaff's sluggish summer

July BBB Sales

2007 2008 Change

Restaurants and Bars $17.8M $17.6M -1.2%

Hotels and Campgrounds $9.7 $9.8 1.8%

Total $28.2M $28.1M -0.5%

July Taxable Sales

2007 2008 Change

Construction $61.3M $45.6 M -25.6%

Auto Sales $15.6M $12.6 M -19.2%

Total $185.8M $183.1M -1.4%

Homes on Market

Price # Months supply

0-$350,000 281 7

$350,000 727 17

New Building permits (year to date)

2007 2008

Total 178 87

Value $ 58.3M $45.7M

- Source: City of Flagstaff

Home sales

Single-family 2007* 2008*

Median price: $370,000 $349,000

Number of sales: 556 478

Condos/townhome sales 2007* 2008*

Median price: $213,882 $225,000

Number of sales: 330 190

*Year-to-date through August

- Source: Northern Arizona Association of Realtors

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