Sedona AZ Real Estate Market Conditions

June 2010 Real Estate Market Update & Trends

Overall, the trends that we've seen since the 1st Quarter of 2009 are still on track. 2008 was the nadir of the Sedona Real Estate Market in the 21st century. By contrast, 2009 started a bit slowly, but by spring, Single Family Home sales were rolling and continued to pick up steam as the year wore on. By year's end, the number of sales recorded in 2009 exceeded 2008's by 52%. That momentum carried on into 2010. By the beginning of June 2010 sales were 70% ahead of 2009's and nearly 100% more than 2008's.

Although there has been a bit of a lull in activity in the past month - Pending sales have dropped from 86 in April to 66 currently - we are closing in on sales numbers we haven't seen since 2006 and we will surpass them in the coming months. That's units sold, not prices. The Median Recorded Sales Price of Single Family Homes in June of 2006 was $580,000 (sliding off the price apex in April 2006 of $660,000).

Current prices have not been pulled up by surging sales. The Median Recorded Sales Price of Single Family Homes was $390,00 in December of 2009 and that's exactly what it is right now. If you've followed these market updates closely for any time, you'll know that REO's (foreclosures) make up about a third of all home sales (even though they constitute only 6% of the active listings) and Short-sales account for another 10%. Distressed properties not only sell for less, they act as a wet blanket on the competition, suppressing prices in general. As long as REO's comprise a significant segment of the market they will continue to be a drag on prices across the board. Frankly, I don't see the flow of REO's into the market abating any time soon. The upside of that phenomenon is that the low prices are fueling the market. Far more people can now afford to buy homes and land in Sedona than we saw five years ago. Knowing that prices inevitably will go sky high here, buyers are showing up in strong numbers to scoop up the bargains. And, bargains abound right now.

With prices 40% off the 2006 peak everything is a relative bargain. In individual cases, though, we've seen some prices that are throwbacks to the 1990's. Time, as Jim Cramer would say, to back up the truck and load up. A lot of buyers are doing just that, but fear and the slow pace of the economic recovery is stilling holding many back. When prices were booming we all, despite history, were sure that they would continue to rise indefinitely. With a downturn, people tend to harbor the reverse psychology and expect the worst. The current conventional wisdom is that real estate prices in general will increase at a modest pace in the future - nothing like the wild ride we had five or six years ago.

I submit an alternate scenario for Sedona. Real estate prices in beautiful and unique locales rise much faster and further than in the mundane. Oceanfront property, for example, whatever lumps it might take in the short-run will, inevitably, become vastly more expensive than ordinary property. The supply of real estate in Sedona is in even shorter supply than in coastal areas. The astounding beauty, the spiritual qualities, the mild climate, the cosmopolitan culture, the amazing people, the marvelous Quality of Life in Sedona will always be powerful draws. There will come a time in the not-too-distant future when the prices people paid for homes and land here in 2005-2006 will seem like veritable bargains. Guaranteed.

Dr. Roy Grimm is the Head of the Buyer Brokers Group of Russ Lyon Sotheby’s International Realty, serving the Sedona and Flagstaff areas. He is a Certified Residential Specialist, an Accredited Buyer’s Representative, & has been recognized by Who’s Who in Luxury Real Estate. For questions or comments email him at Roy@SedonaRealEstate.com.

Click on the link below to see the full statistical
report comparing 2009 with the past ten years.

2009 in Historical Perspective
Sedona Area Market Statistics

For Current Sedona Real Estate Market Statistics - as of June 2010,

Click on the the next link below:

June 2010 Sedona Real Estate Stats

BACKGROUND:

Single Family Homes:

  The apex of the price curve was $660,000 in the spring of 2006.  And, the bottom in January 2009 was $369,000.  Currently, the median price for a home in Sedona stands at roughly $390,000. 

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 $322,000. 

Sedona vacant residential lots appreciated at an average annualized rate of 21% a year between1996 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 currently stands at about $160,000 for now. in 2010.

FUTURE:

The General Outlook: for Real Estate in the Sedona Area

2006 shaped up to be a year in which the pendulum swung back toward the Sedona real estate buyer. That continued through 2007, 2008, and 2009. Inventories of homes and land are, as I mentioned, way up.  And, they stay on the market longer. That makes for a golden, but temporary opportunity for the buyer.

Longterm, though, 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 gains. Read more about the end of the housing crisis from the Wall Street Journal.

Short-term

(This forecast was written in the Fall of 2008  & it's happened - the rebound continues to grow stronger).

We are seeing some remarkable activity in the market lately that leads me to believe that we're about to see a fall surge in Sedona market even if the national market is still flopping.  Since last fall we've had as many clients visit for a reconnaissance as we had back in 2005, but most decided to hold off until they felt the market had bottomed.  There has been a huge backlog of buyers building - all waiting for the same thing.  Guess what?  With the drop in the Fed rates and mortgage rates combined with a number of other government initiatives and bail outs of the credit industry AND Sedona's long term prospects for appreciation, our sophisticated buyers are picking up the sense that we're about to turn the corner here.  You heard it here first: the Sedona real estate market will BOTTOM this winter and rebound in the spring of 2009.

So, that is exactly how it worked out.  Sedona real estate sales continued to get stronger throughout 2009 and the surge is even more robust in 2010.  We're already back to sales levels of 2006 and we should well exceed that by the end of 2010.

Prices, however, will remain low until we work through the backlog of foreclosures.  That'll take at least a year.

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. They're buying land and second homes with an eye toward retirement in a few years. The forty-year-olds 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 AZ 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 $160,000 - 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 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 $125,000 if you want a membership in the very upscale and exclusive private Golf Club. They have recently opened a world class, Tom Weiskopf course. When they first began marketing 20 lots at a million an acre nine years ago, my thought was: "This is where Sedona 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 about $250,000 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 $200,000 (the median price of a home there) will still buy a fairly nice house. The average sales price of a single family house in the rest of the Verde Valley is 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 has taken place in the Verde Valley in recent years 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 or built to your specifications on or near the golf course at a cost ranging from less than $200,000 to the $400,000s. 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 $350,000, 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.