Sedona AZ (January 23, 2013) – The market is finally off the bottom, despite the continuing weak economic recovery. As mortgage rates have remained enticing, Lenders have been able to sell inventory acquired from delinquent borrowers relatively quickly. This fluidity is one of the benefits of being in a non-judicial, or Deed of Trust, State. In Florida, a judicial State, RealtyTrac informs us that the average time taken to foreclose is 858 days. This delay in moving unwanted inventory has only allowed a modest improvement in home values. According to S&P/Case-Shiller, a Miami FL home has increased by 8.5%, whereas a Phoenix AZ home has risen by 21.7%.
The table above, showing quarterly median Sedona home values, gives an improvement of 14.7%, taking 4th quarter 2011 against 4th quarter 2012. However, before you rush out to castigate your REALTOR®, as they say in some advertising, “Individual results may vary.” There are so many attributes to be considered in valuing a home, especially a home in Sedona. Perhaps the most subjective variant is how to value of the “View.” Placing your home correctly for sale in the marketplace is a skill acquired with experience and knowledge.
I like to take a rolling six month series for sales of Closed Residential Homes (only). I feel this gives a better view of how the market is moving, and it is not unduly influenced by odd or limited data. Looking at this series, the average price per square foot, for the six months ending December 2011, was $173.27 per square foot. The respective number as at December 2012 was $196.14 per square foot, a 12.7% increase.
The chart above shows the six month series for Median prices for closed Residential Home sales with the addition of the first input increased by the monthly percentage change in the Consumer Price Index. This gives a perspective on how property values change over time against the rate of inflation.
Vacant land sales have been relatively slow to follow the trend. This may in part be due to the reluctance of lenders to help finance unimproved land. In a normal market situation, speculative builders acquire vacant parcels, construct a home, and then sell that home in the secondary market at a profit. The costs associated with that endeavor have not been to the builders’ advantage. Although interest rates are attractive, the costs of supplies (nails; timber; cement; etc.) have increased, as well as the cost of delivery (gas prices). Although the building trade is a lot more optimistic, we have yet to see a major increase in speculative building.
The average number of housing units sold per month in 2012 was 34, which is almost exactly the same as the 33 in 2011. The average number of residential vacant land lots sold per month in 2012 was 10, versus 7 for 2011, which is an improvement, but not a spectacular one.
If you take the total value of the residential acreage sold per month, and divide that by the total acreage, we arrive at a price per acre. The chart below shows this series. Although it doesn’t show the improvement in values that the Residential Homes chart shows, it does look stable.
Please remember that you cannot divide the acre price by, say ¼ to arrive at a value for a quarter acre parcel. The values for vacant land lie along a curve, and smaller parcels will appear to have more value per acre than larger parcels.
The number of foreclosures has reduced over time. At the peak, distressed properties accounted for about 44% of Sedona Residential closed sales. That number is now down to about 24%. Historically, foreclosures (REOs) accounted for about 74% of all distressed sales, while currently they account for about 65%. There were a number of predictions that the Short Sale would come to dominate, but, despite an increased share, that situation has yet to materialize. In 2011, there were 45 closed Residential Short Sale transactions, and 98 REO transactions. The numbers for 2012 are 34 and 63 respectively, only a 4% swing in favor of Short Sales.
The Absorption Rate has maintained itself in the narrow “Transition” band between a Buyer’s Market and a Seller’s Market. (See chart below).
Splitting the Absorption Rate into groups, below $400,000 the Rate is 3 months; below $600,000 it is 5 months; and below $800,000 it is 6½ months. The Rate for the total market is 7 months. This would seem to indicate that Buyers selected the lower value properties in order to get their piece of Sedona.
There has also been a gradual loss of inventory. The peak number or Residential Homes listed for sale was 290 on July 14th. The number as at December 29th was 246. It will be interesting to see if inventory rebounds in the New Year.
The other slightly contrary fact is the number of price reductions versus price increases. Every week there are a significant number of price reductions, with no real number of price increases. With the market improving, this can only mean that Sellers continue to overprice when first listing their property for sale. Maybe, if things continue to improve, this balance will change. However, there is a “cost” to sitting there waiting. The quantitative things would include utilities; taxes; maintenance etc. while the subjective would be keeping the home spotless, just in case of a showing, and not being able to get on with your new life.
All in all, the Sedona market looks in good shape for 2013 and beyond, assuming the economy and other financial matters improve, as well.
Sean Baguley is an Associate Broker with Russ Lyon Sotheby’s International Realty, 1370 Hwy 89A in Sedona, Arizona. Email Sean at Sean.Baguley@sothebysrealty.com or call him at 928-399-4700 to help with your real estate dreams and lifestyle in beautiful Sedona. Visit Sean’s website which will allow you to search the local MLS. All statistics have been obtained from the Sedona Verde Valley Association of REALTORS® Multiple Listing Service, or as attributed in the text.