“May you live in interesting times,” goes the so-called Chinese Curse.
2020 was certainly one of the most interesting years of our lives – for better or worse, depending on your point of view. For Sedona real estate it was a wild ride, from a robust 1st Quarter to a complete standstill in mid-Spring to a record-breaking rest of the year. The pace of home sales in 2020 harkened back to what we saw in 2005 and 2006 – and then blew by all the records. The Median Recorded Sales Price of Single-Family Residences hit an all-time high and home inventory is now at an all-time low. Luxury home sales more than doubled 2019’s record number. Even the dormant Vacant land Market has finally awakened as the supply of homes has dwindled to unheard of levels.
That sort pace is difficult to sustain and we are now seeing the market cool a bit for the time being, partly for lack of inventory and partly because winter usually is quiet here. But, the underlying fundamentals are likely to keep the migration of affluent buyers from California and major metropolitan areas around the country flowing for a long time to come. Winter is typically our slowest season for real estate, but my sense is that 1st Quarter 2021 is going to see a much stronger market this year than usual.
MRSP for Sedona in 2020 (up 15% over 2019)
New record amount of $1,000,000 + Homes Sold
2020 – A Year for the Record Books
Starting with the bellwether Single-family Residence sector, 2020 saw a new sales record of 632. That’s 27% higher than the 2019 number. The Median Recorded Selling Price (aka, MRSP) also broke the 600 ceiling for the first time and settled at $650,000, up 15% over 2019. The previous record was $590,000, set in 2006. What is even more remarkable was the astounding decline in home inventory. We ended the year at 50 Single-family Residences listed in the Multiple Listing service. A year ago we were at 185. At the same time we’re still seeing a relatively strong buyer activity with Pending Sales up 22% year over year. That activity and significantly higher prices should coax more sellers into the marketplace.
All these figures are for the Greater Sedona Area – including the Village of Oak Creek. Nearly twice as many Single-family Residences were sold in the City, close outlying areas, & Oak Creek Canyon than in the Village and the price differential widened. Historically, the City’s average selling price per square foot is about 10% more than the Village. For 2020 it was 17%. Or, $323 versus $276. The City’s MRSP for 2020 was $703,000; The VOC’s was $545,243, but the average size of a home in the VOC is considerably smaller than in the City of Sedona. So, we tend to rely on the cost per square foot when comparing the two. Furthermore, 106 of the 120 sales of homes priced at one million dollar or more in 2020 were in the City area versus 14 in the VOC.
Speaking of luxury homes, that market sector was the star of the show in terms of setting new records. A little historical perspective: from 2008 through 2017 the average number of million dollar+ home sales was 25.4. Up to that point the record, set in 2006, was 55. In 2018 we saw 53 sales and finally a new record of 56 in 2019. Then came 2020. 120 single-family home sales of one million dollars and above! And, that doesn’t count the new player in that market: million dollar townhomes at Seven Canyon Golf Resort and The Cottages at Coffeepot. If we add in those 11 sales, we have a total of 131 sales of homes priced at $1,000,000 and up!
Oddly enough, despite such astounding sales numbers we did not see a huge jump in the cost per square foot of those homes. For the five years preceding 2020, the average was $353/sq. ft.. In 2020 the figure was $393 – only an 11% increase. That appears to be changing recently as the supply of homes has diminished dramatically. The Law of Supply and Demand has been kicking in and will continue to do so as long as buyers continue to stream into Sedona and are willing to pay a premium for the joys of living in Sedona.
The one sector of the Sedona real estate market that could always be counted to be somewhat contrarian is Condo/Townhomes. True to form, sales there declined 9% from 2019 to 2020. But, that’s quite deceiving. The MRSP was up an impressive 24%. Chalk it up to a lack of supply. Of the Active Inventory of 20 homes on 1 January 2021, 3 were million dollar townhomes at Seven Canyons and 12 were new constructions at Park Place where prices are typically in the $700,000 plus range. Some observers have for a long time seen the Townhome Market as a harbinger of where Single-family Residences are headed. Indeed, we have seen the low inventory and increasing prices slow the sales momentum in the latter.
All sectors of the housing market point to Sedona’s becoming increasingly a luxury market.
But, what about the long -suffering Vacant Land sector. Housing has roared back with a vengeance and then gone well beyond the peaks we saw back in 2005 and 2006. Land, on the other hand has yet to recover from the Crash. Back in 2006, the MRSP for land sales was $519,000. In 2019 it was $167,500. Until recently it was less expensive to buy a pre-existing home than to buy land and build. Now, as the pendulum has swung the other way, we’re seeing a bit of a land rush. Sales are up 35% over 2019 and the MRSP has advanced 18% to $198,250. That, of course, is a long way off $519,000, but at least it is significant movement in the right direction. Supporting that is a dramatic drop in inventory. There are still plenty of land listings, but they are down from well over 300 lots to 159 currently. And, they are a non-renewable resource. Once they built on, they’re out of the picture. Since we are completely surrounded by U. S. National Forest, Sedona can’t push beyond its borders to create new supply.
I see vacant land as the opportunity sector of our real estate market. Prices are relatively low, historically, and especially below where they will, inevitably, go as the supply dries up. I expect that they’ll eventually well exceed what we saw in 2006. The downside, for buyers who want to live here now is that it’s likely to take a minimum of a year and a half to two years to build a home and costs of building continue to rise. Still, investing in vacant land is clearly likely to return impressive returns over the long-term.
All in all, prospective buyers in all sectors of the Sedona real estate market would do well to take advantage of the winter lull to make their moves. Once we hit the spring season we’re likely to see a gang-buster sellers’ market.