Low inventory, stable high prices, reduced sales volume, higher interest rates, shifting buyer demographics, and a balanced market – these are elements of the new normal as the Sedona real estate market moves inexorably toward being predominantly luxury home focused.
That said, the 1st Quarter of 2023 numbers came in as predicted. Grim. It was a rough winter for the market; the weather and the bank crisis didn’t help. Single-family Residence sales were down 45 percent, year-over-year: 73 in 2023 vs. 133 in 2022.
Their Median Recorded Sales Price was off by 18 percent; down from $1,150,000 to 937,500. Taking the comparison back to the more “normal” years of 2017-2019, sales were still down by 34 percent, but the MRSP has jumped 73 percent since then.
45%
SFR Sales down from 2022
$937,500
MRSP down by 18% (but jumped 73% since pre-2020)
Beyond these sales numbers so far this year, the key statistic is the inventory of active listings -currently about 90 homes. While that remains nearly three times the number it was in the 1st Quarter 2022 it is still roughly half of what it was in 2017-2019. That’s likely to be the case for some time to come. In fact, inventory has been declining a bit at a time when it is typically increasing heavily. Given interest rates and prices elsewhere, Sellers are loathe to move. Then there’s the reality that Sedona has very little in the way of sizeable chunks of land upon which developers could build new homes to augment the inventory.
With fewer homes being offered for sale and a median list price at $1,138,000, the pool of eligible buyers becomes shallower, and sales volume is likely to remain relatively low. In any case, we do have a balanced market now. Altos Research’s Market Action Index has been sitting at 33 for weeks. Above 30 is a seller’s market. So, although conditions have improved for buyers, it’s not yet a buyer’s market.
Those buyers are more discerning and comprise a somewhat different mix from the “old normal” of five years ago. Boomers remain a mainstay, but we’re increasingly seeing young professional and remote-working families with kids. And, although Sedona has always attracted affluent buyers, the ultra-wealthy have now appeared on the scene, attracted not only by the scenery and climate, but lower taxes and the perception of less governmental intrusion. Finally, are the local and out-of-town buyers of property that can be short-term rentals. Those properties generally come with a price premium in the neighborhood of 20 percent and have helped push sales and rental prices up. Good if you are a homeowner, not so great if you are renter.
Buyers slowly returning to the market
If you are a home seller, be aware that buyers’ tastes have evolved somewhat over the years, especially given today’s prices. Of course, they still want views, privacy, and acreage, but the current buyer tends to be looking for contemporary architecture, open floor plans, indoor-outdoor living, pools, luxury finishes, chef’s kitchens, top-of-the-line appliances and first-rate construction. And they expect the home to be move-in ready and often want to buy it fully furnished. Buyers are slowly returning to the market, but they are pickier .
Finally, the land market has shown mixed results so far this year. A drastic drop in sales – down 76% from 2022 at this point. But some good news for sellers: the MSRP is back up to $330,000. It had declined to $260,000 by the end of December. And, there has been a 25% increase in Pending Sales in the past couple of weeks.
Across the U.S., Chief Economist for the National Association of Realtors, Dr. Lawrence Yun expects 2023 sales to be down 7 percent and prices up 1 percent. For 2024, he predicts sales to be up 10 percent and prices up 5 percent.
Zillow , our one source for local home valuation forecasts, sees in 2023 an increase of 1.7 percent for Zip Code 86336 (City of Sedona+). For 86351 (VOC – Village of Oak Creek), in February they revised their prediction from a 0.4 increase to a decrease of 0.1 percent.