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Roy's Cell: 928-300-0690
Sedona AZ Real Estate
Market Conditions
The Results Are In For 2011; Where To From Here?
Roy E. Grimm, PhD.
Amid signs of a glacial, but steady, national economic recovery and positive news on the real estate front, even in Phoenix, the Sedona market finished 2011 with a bit of a flourish.
Single family home sales, for the second straight year, just managed to best their total for 2006, the year the bubble began to swoosh. Prices then were at their all-time high, with the Median Recorded Sales Price for the year at $590,000. At the other end of the spectrum, 2011 finished at $350,000, 59% of 2006’s MRSP. That’s down 4% from last year’s $365,000, but it does represent a modest 6% recovery from Mid-Year 2011 when the MRSP dipped to briefly $330,000. June 2011 now stands as the lowest price point since 2003. The second half of the year saw monthly medians move into the $400,000’s (December’s MRSP was $419,000) and that pulled up the over-all year’s figure.
Some of that price recovery and guarded optimism from economists is thanks to a diminished impact of foreclosures on the real estate market. Nationally, foreclosure filings and activity are down 34%, though some of that is due to clogs in the pipeline in states that have a judicial foreclosure process (Arizona does not). Locally, REO (“Real Estate Owned” by a bank) inventory throughout 2011 has been nearly half of what it was in 2010 and REO sales are down 24%. The lack of that inventory, particularly of good quality REO homes has often resulted in multiple offers and selling prices considerably above the list prices.
If we can take Bank of America, Wells Fargo, and Chase at their word in a recent conference in Phoenix, Arizona should see foreclosure activity decline even further as those banks execute their new policy of expediting more short-sales in an effort to create fewer REO’s. In the past, short-sales have, more often than not, simply been a waste of time for buyers and sellers. Such an approach would seem to have been an obvious one for the banks since short-sales usually sell for more than REO’s. Getting some rationality from the banks would be a refreshing change.
The National Association of Realtors reports a sustained surge in pending home sales across the country, the best since the buyer tax credits of early 2010. They are also projecting a 5% increase in home sales and a 2% uptick in in each of 2012 and 2013. Not overwhelming numbers there but, like unemployment rates, they’re moving in the right direction. Sedona should be considerably out in front of those figures.
Finally, although the local statistics cited in this column lump the City of Sedona and the Village of Oak Creek together, it should be noted that buyers get more bang for their buck in The Village, especially lately. Historically the VOC is about 7% less expensive. In 2011 the differential was roughly 15%. The Cost per Square Foot for the City was $177 versus $151 for the Village. Quite a bargain for value-conscious buyers as prices continue to drift up.
For Current Sedona Real Estate Market Statistics,
Click on the the next link below:
End of 2011 Market Statistics in Historical Perspective
BACKGROUND:
Sedona real estate in Historical Perspective
Single Family Homes:
The apex of the price curve was $660,000 in the spring of 2006. And, what we thought was the Bottom in January 2009. The Median Recorded Sales Price then bounced up into the $400K range before settling into the high $300K’s for next year or two. By June of 2011, we hit a Second Bottom of $330,000. Since then we’ve seen a sharp upturn in the monthly MRSP into the mid-$400K’s that has pulled the yearly figure up to about $350,000 so far.
Sedona townhomes and condominiums are popular here since a large percentage of our buyers purchase second homes and condos are ideal for that. Currently the median selling price is roughly 200,000, down from nearly $400,000 in 2006.
Sedona vacant residential lots appreciated at an average annualized rate of 21% a year between 1996 and 2006. The median price soared to over $500,000 in 2006, but that started coming back to earth in the first half of 2007. That figure stands at about $125,000 for now in 2011.
FUTURE:
The General Outlook: for Real Estate in the Sedona Area
2006 shaped up to be a year in which the pendulum began to swing back toward the Sedona real estate buyer. That swing has continued since. We’re still in great Buyer’s Market with prices in general more like 2003. In some cases homes are selling for what they went for ten years ago.
But there are definitely signs of a shift. Inventories of homes and land peaked in 2008, but have dropped dramatically since. There were 598 Single Family Homes on the market in 2008; now there are 334. Demand is way up. The number of homes sold in 2010 exceeded the number in 2006. With supply down and demand up, prices should be soaring. That’s not the case, however, thanks to the impact of foreclosures on the market. But, even that seems to be lessening a bit so far in 2011. So we may see prices start to drift up later this year.
Longterm, I think that we can expect a hyperbolic market ahead for at least another couple decades based on our local market fundamentals, very limited supply and strong demand. Prices will go sky high within this decade and stay there. Right now is probably the buyer’s best opportunity to get in with the expectation of phenomenal capital gain.
Long-term
So what generally drives the Sedona real estate market in the long-term? Economics 101, Supply and Demand theory in action. Sedona is an island of private land surrounded by National Forest and the supply is shrinking inevitably. Demand is being pushed by the demographics of the Baby Boom. The majority of our clients these days are Boomers in their 50s and 60′s. They’re buying land and second homes with an eye toward retirement in a few years. The “forty some-things” are just starting to appear. This demographic phenomenon is likely to continue for another couple of decades, ultimately pushing prices to unimaginable heights as the supply of land runs out.
Land:
“Buy land. God ain’t makin’ anymore of it.“
Will Rogers’ famous quotation is especially true in the Sedona real estate market.
Back in 1996, the median selling price of a Sedona residential lot was $86,250. As noted above, it’s now about $125,000 – back to 1990′s levels after having hit $500,000 in 2006. The current flat market is, in my opinion, merely a short-term pause in an eventual massive move up. Many local and national observers see Sedona’s real estate situation as akin to Aspen’s twenty or thirty years ago as we anticipate a virtual sell out of Sedona’s vacant land within a decade or so, once the market recovers.
Many of our clients are buying property now as a hedge against what they know will be a dramatic run up in prices over the next few years. Some are buying second homes that they can use for vacations or rent out with long term leases or as short term vacation rentals. Others are opting to simply buy land to build on later. There is a longstanding debate over the virtues and hassles of building a home, but many people are willing to persevere to customize a home to their own tastes and there are several outstanding builders and architects in Sedona that I am happy to recommend.
It is still possible, by the way, to spend well over two million dollars for a one acre lot at the Seven Canyons Resort and Club. And, you’ll need another $75,000 if you want a membership in the private Golf Club – a world class, Tom Weiskopf course. But, talk to us first so we can fill you in on the current financial and ownership picture there. When they began marketing 20 lots at a million an acre a decade ago, my thought was: “This is where Sedona real estate is going in the future, but those prices are way premature.” I was wrong. They sold most of those lots in six months. There definitely is a sense in Sedona that , in spite of the current inventory, there will be relatively little Sedona vacant land left and once we’re built out, prices like those at Seven Canyons will be the norm as they are in places like Aspen, Jackson Hole, and Carmel.
At the moment, though, a luxury building site, which may be a small envelope at Casa Contenta or a little under an acre at Back O’ Beyond, or one acre plus at Cathedral Rock Ranch or two acres bordering National Forest at Cross Creek Ranch start at under $200,000 and can range up to well over two million dollars. What you can expect from them are stupendous views, gated privacy, and multi-million dollar homes in the neighborhood.
In any case, there remains, for the moment, an excellent, but finite, supply of land in Sedona and prices have plummeted.
Properties Outside of Sedona -The Verde Valley & Flagstaff Real Estate:
In areas such as Lake Montezuma , Oak Creek Valley , Camp Verde , Cornville, and Cottonwood , home prices are significantly lower and $150,000 (the median price of a home there is $120,000) will still buy a nice house. The median sales price of a single family house in the rest of the Verde Valley is considerably less than half of that in Sedona. Of course, you sacrifice the dramatic red rock views and ambiance of Sedona, but it does make economic sense and there are some spots with dramatic settings of their own, all within twenty or thirty minutes of Sedona. Many people, understandably, prefer some of the delightfully green hidden valley spots along Oak Creek or the Verde River with their big trees and sounds of gurgling water although water-front property can also get very expensive.
In fact, a housing construction boom occurred in the Verde Valley in the first half of the decade with so many people wanting the beauty, climate, and lifestyle here without the Sedona prices. A good example of this is the rather large, but tasteful, development called Verde Santa Fe being built around the new golf course near Cornville between Sedona and Cottonwood . From there it’s about a 15 to 20 minute drive A modern southwestern style house or townhome with great views of the mountains can be purchased on or near the golf course at a cost ranging from $120,000 to $450,000. Presently there is a huge over-abundance of supply there with both resales and new construction. I think they’re a good value. Remember that it is just as important for you to have buyer broker representation at new home developments and with “spec house” builders as it is on home re-sales.
27 miles to the north of Sedona is Flagstaff. In spite of its proximity, it’s a world away; as different from Sedona as is Phoenix on the opposite extreme. At 7,000 feet, it’s an alpine climate with real winter and a decent ski area. The median price of a home there is about $300,000, so there’s more bang for your buck and lots of pine trees if you don’t mind snow.
If you’d like to explore that option, visit our Flagstaff real estate site at: www.FlagstaffBuyerBrokers.com. Or, call us at the toll free number:
(800) 282-2959.
For clients interested in these alternatives, we can find you the best buys, in the nicest locations throughout the Verde Valley and Flagstaff.. Give us a call at (800) 282-2959 or email us at: Roy@SedonaRealEstate.com We will send you full reports and be your guide to the Verde Valley and/or Flagstaff.
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