The news from the long-suffering Vacant Land Sector has been, pardon the expression, grim, since the market crash over a decade ago – until this past year.
Back in 2006, the Median Recorded Selling Price of vacant lots was $519,000. In 2011, it was $108,000. By the end of the 1st Quarter 2020, the MRSP had worked its way up to $176,000, but was still being vastly outpaced by the housing market recovery.
Ironically, however, the Year of Covid has brought new life to the land market. With the inventory of homes at unheard-of low levels, many buyers are switching to land and building what they really want, despite daunting increases in building costs.
There is a growing realization among buyers that, plentiful as it has been for the previous decade, vacant land in Sedona is a non-renewable resource. Bounded as we are by National Forest, there is precious little land that can still be developed and we can’t create more. The supply will inevitably diminish to a point at which prices will sky-rocket. As that dawns on more prospective buyers, the land market come-back gains inexorable momentum.
MRSP for Land up 26% as of late April
Land parcels inventory dropped 60% from 275 to 97 in April ’21
Land Sales Making a Big Comeback
That comeback is already well underway and gaining strength in dramatic fashion. At the end of the 1st Quarter 2020, 31 lots had sold. In 1st Quarter 2021, that nearly tripled to 91. The MRSP rose 26% to $222,500; $228,000 by late April. That’s still a far cry from $519,000, but the land market is now in its take-off phase. Inventory dropped 60% from 275 parcels in 2020 to 97 in April 2021. Conversely, demand continues to spike. At 1st Quarter 2020, there were 9 parcels pending sale – that is, under contract for purchase. In 1st Quarter 2021 we had 90 – ten times as many.
The Law of Supply and Demand is beginning to make its presence felt. The Median List Price of those Pending Sales is already up to $375,000. 2006 prices may be back sooner than we thought.
As Will Rogers (and perhaps Mark Twain) is supposed to have said, “Buy land, God ain’t making any more of the stuff.”
Regarding the housing market, 1st Quarter figures saw the Median Recorded Sales Price of Single-Family Residences jump 44 percent to $825,000 then settle to $800,000 by late April while the average cost per square foot shot up a hundred points to $375. The spike in those numbers can, in part, be attributed to the continued hot market among homes over $1,000,0000. They made up about 30% of the single-family residence sales – 52 already by late April. In the general market, active home listings were a fourth of what they were last year, down to about 40 homes, while Pending Sales doubled. By late April, the inventory is up to 50. At least that’s a positive trend, if still woefully short. The resultant rising prices are coaxing more and more homeowners to put their properties on the market, but they are often snatched up immediately with multiple offers.
Eventually the Law of Supply and Demand will also balance the housing market out, but it seems clear that the land market’s breakthrough is here to stay.