Sedona AZ Real Estate Market Conditions

The Current and Future State of the Real Estate Market in Sedona Arizona

Homes:

In May of 2003 USA Today's Weekend edition ran an article entitled, "The Ten Most Beautiful Places in America." Guess who was number one on the list? We locals all knew that; now everyone seems to want to move here.

The effects on the Sedona real estate market are not hard to guess. Since 1996 the median selling price of a single family home in the Sedona area has been going up at an average rate of over 12% a year.  In 2007, though, the median went down 9%.  The first time ever that we've seen a decline in that figure. Currently, the median price for a home in Sedona stands at $525,000. 

As in most paces around the country, however, the Sedona real estate market stalled in 2006 and 2007 and took a decisive swing back to being a Buyer's market.  There are three times as many homes and lots on the market now than there were in 2005 and prices have definitely softened for the time being.  Buyer's do have the advantage now and they are beginning to return in strength to follow up on that advantage. Time to blow into town if you want to snag a bargain.  The longterm prospects for prices here are astronomical.

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 $350,000 .

Sedona vacant residential lots have appreciated at an average annualized rate of 21% a year since 1996. The median price soared to over $500,000 in 2006, but that came back to earth (below $300,000) in the first half of 2007, but a 33% jump in the secons half of the year.  That figure currently stands at about $395,000 for now. 

General Outlook:

2006 shaped up to be a year in which the pendulum swung back toward the buyer and that continued through 2007. Inventories of homes and land are, as I mentioned, way up.  And, they stay on the market longer. Overall numbers of sales are off by nearly 35%. In short, in early 2008, we have a Buyer's Market - for the moment. We've finally seen sellers back off their list prices in earnest and be open to hard bargaining . 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

We are seeing some remarkable activity in the market lately that leads me to beleive that we're about to see a surge in out local market even if the national market is still flopping.  I say, remarkable, because winter is our slowest season and we've been very busy for the last three or four months.  At first it was just Buyer Brokers Realty, but, now I'm hearing other agents and companies saying the same thing.  Since September we've had as many clients visit for a reconnaissance, 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 (like raising the limit on jumbo mortgages) 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 HAS BOTTOMED .  We'll see a leap in activity and prices by this spring.

See my column in the winter 2008 edition of Sedona Monthly Magazine for more details on that: www.SedonaRealEstate.com/articles/index/html.

Long-term

So what generally drives our 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 decade or two, 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 hitting home in the Sedona AZ real estate market in a major way these days. The land rush is on and it ain't cheap.

Back in 1996, the median selling price of a residential lot was $86,250. As noted above, it's now above $350,000. 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 complete sell out of vacant land within a decade.

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 three million dollars for a one acre lot at the new Seven Canyons Resort and Club. And, you'll need another $250,000 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 two or three 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. Now they are bringing out their last ten lots along the ridge above the course at prices ranging from three million and up. There definitely is something of a land rush in general lately as people realize that there is very little vacant property 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 the new Cross Creek Ranch start at a minimum of $500,000 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, if rapidly dwindling, in the long run, supply of land in Sedona.

Here are recent market statistics which also show the historical trends:

Mid-Year - 2008
Sedona Area Market Statistics
(City of Sedona, Oak Creek Cyn, Red Rock Loop, Village of Oak Creek)
provided by Roy E. Grimm, PhD. & SVVAR

Single Family Homes:

# SOLD by 1 July 2003: 275
Median Recorded Sales Price: $330,000 (List median: $331,000)
Size: 2,077 sq. ft; Price per sq. ft: $159; Days On Market: 129

# SOLD by 1 July 2004: 308
Median Recorded Sales Price: $380,000 (List median: $381,000)
Size: 2,089sq. ft; Price per sq. ft: $182; DOM: 107

# SOLD by 1 July 2005: 345
Median Recorded Sales Price: $520,000 (List median: $530,000)
Size: 2,150 sq. ft; Price per sq. ft: $242; DOM: 63

# SOLD by 1 July 2006: 235
MRSP: $595,000 (List median: $600,000)
Size: 2,051 sq. ft; Price per sq. ft: $290; DOM: 79

# SOLD by 1 July 2007: 150
MRSP: $580,000 (List median: $599,450)
Size: 2,099 sq. ft; Price per sq. ft: $276; DOM: 114

# SOLD as of 1 July 2008: 111 (Down 26% from 2007)
MRSP: $509,500
(down 12% from 2007)
List median: $549,000
Size: 2,026 sq. ft;
Price per sq. ft: $251;
DOM: 125

ACTIVE (1 July 07): 463
Median List Price: $699,000
Size: 2,316 sq. ft; Price per sq. ft: $303; DOM: 103

ACTIVE (1 July 08): 517
Median List Price: $675,000
Size: 2,391 sq. ft; Price per sq. ft: $282; DOM: 122

UNDER CONTRACT (1 July 07): 38
Median List Price: $625,000
Size: 2,037sq. ft; Price per sq. ft: $294; DOM: 149

UNDER CONTRACT (1 July 08): 32
Median List Price: $477,000
Size: 1,920 sq. ft; Price per sq. ft: $248 DOM: 114

Luxury Homes ($1,000,000+):

# SOLD by 1 July 2003: 16
MRSP: $1,287,000 (List Median: $1,445,000)
Size: 4,596 sq. ft.; Price per sq. ft: $280; DOM: 248

# SOLD by 1 July 2004: 18
MRSP: $1,182,000 (List Median: $1,297,000)
Size: 4,051 sq. ft.; Price per sq. ft: $292; DOM: 221

# SOLD by 1 July 2005: 30
MRSP: $1,250,000 (List Median: $1,285,000)
Size: 3,794 sq. ft.; Price per sq. ft: $329; DOM: 129

# SOLD by 1 July 2006: 35
MRSP: $1,245,000 (List Median: $1,295,000)
Size: 3,444 sq. ft.; Price per sq. ft: $361; DOM: 167

# SOLD as of 1 July 2007: 30
MRSP: $1,318,000 (List Median: $1,420,000)
Size: 3,509 sq. ft.; Price per sq. ft: $376; DOM: 154

# SOLD as of 1 July 2008: 13
MRSP: $1,600,000
(List Median: $1,700,000)
Size: 3,800 sq. ft.;
Price per sq. ft: $421;
DOM: 140

ACTIVE (1 July 2007): 121
Median List Price: $1,575,000
Size: 3,526 sq. ft.; Price per sq. ft: $447; DOM: 123

ACTIVE (1 July 2008): 121;
Median List Price: $1,550,000
Size: 3,841 sq. ft.; Price per sq. ft: $404; DOM: 142

UNDER CONTRACT (1 July 2007): 6
Median List Price: $1,585,000
Size: 3639 sq. ft.; Price per sq. ft: $436; DOM: 306

UNDER CONTRACT (1 July 2008): 4
Median List Price: $1,253,000
Size: 3,396 sq. ft.; Price per sq. ft: $436; DOM: 132

Properties Outside of Sedona:

In areas such as Lake Montezuma , Oak Creek Valley , Camp Verde , Cornville, and Cottonwood , home prices are significantly lower and $250,000 (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.

There has been, in fact, a housing construction boom going on 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 $200,000 to the $400,000s. Presently there is an 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.

For clients interested in these alternatives, Buyer Brokers Realty of Sedona can find you the best buys, in the nicest locations throughout the Verde Valley . Give us a call at (800) 282-2959 or email us at: info@SedonaRealEstate.com. We will send you full reports and be your guide to the Verde Valley.