Hot Sedona real estate shows signs of cooling

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The demand for real estate in Sedona is high and inventory is low. Homes that cost an average of $ 500,000 are long gone.

The median-priced new home in Sedona averages $ 850,000, and million-dollar homes are in high demand.

Has Sedona hit its peak in the housing market?

With the cost of homes rising, inventory levels low, more short-term rentals and the limited number of rental units available, will the Sedona bubble burst? Will there be an adjustment in the selling prices of the houses? Are we going to experience another stock market crash similar to 2007-2008?

No collapse planned at this time

According to several local real estate agents, there is no indication that the market will collapse anytime soon. On the contrary, many believe Sedona is now a luxury market with buyers looking for homes over $ 1 million.

“Ten or 15 years ago, people would come to town looking for a house between $ 500,000 and $ 700,000 and ask them what they could get, and you would show them the houses available,” said Rick Wesselhoff of Coldwell Banker Realty. “Then that changed when the internet became popular with Zillow and Realtor. com. People would say, “I see the X, Y and Z houses [online], and I want to see them when I come to town.

“Now they say, ‘I see there is no housing available, but I am looking for something like this’, then it is the officer’s job to look for something that is about to go. ‘hit the market,’ Wesselhoff said. “It’s gone from having a ton of inventory to composing what they want and now they want it and it’s just not there.”

The buyers

Many real estate agents surveyed said at least half or more of buyers are from California. Many of the buyers are people in their 50s who realized during the COVID-19 pandemic that they could work remotely and wanted to live in a beautiful place and raise their families in a safe environment. A few of the multi-million dollar homes have been bought by young entrepreneurs in their 20s and 30s who want a place where they can telecommute and enjoy the outdoors.

“Based on the trends and the things I’ve studied, Sedona is going to be a strong market for next year,” said Kris Anderson, an agent at eXp Realty in Sedona.

Anderson said she is seeing more sales with younger buyers entering the market and buying million dollar homes. She doesn’t see the real estate bubble bursting anytime soon in Sedona.

“I don’t see this bubble or the foreclosure or the fiduciary sale notice,” she said. “These were the indicators for 2008. I look at the sale notices from trustees and I could predict 180 days if there were any problems. We are not going to see this in Sedona. We are still a secondary market.

Sales up 35%

By mid-year, single-family home sales were up 35% from 2020. The recorded median selling price of these homes jumped 47% to $ 850,000, with an average price per square foot. of $ 385.

“With competition between multiple offers for new listings becoming commonplace, the sell-to-list price ratio has reached an all-time high of 101%,” said Roy Grimm, a broker at RE / MAX Sedona. “That is, on average, homes sold for 1% higher than the list price. This acceleration in prices is largely due to a serious shortage of stocks in the face of continued strong demand. “

The inventory of Sedona and the village of Oak Creek is difficult. Currently there are 148 residential units in total on the market and 82 available, which means there is no contract yet. Of the 82, 42 are in unincorporated areas and within city limits, 30 are houses, eight condos, and two manufactured homes.

Of the 30 homes, two are priced at $ 700,000 or less, nine are priced between $ 700,000 and $ 1 million, and 19 are over $ 1 million.

“We definitely have a lot of people coming here for primary residences, and investment in short-term rentals has also increased,” Wesselhoff said, adding that Sedona “is warmer than Oak Creek Village because half some neighborhoods don’t allow it Short-term rentals A property that allows short-term rentals is worth more to buyers.

In 2021, the number of homes on the market was 27% of that of 2020.

Holiday rents

Contributing to soaring prices is fierce competition for properties that could legally be used as vacation rentals. This attribute led to a sell price premium far beyond what a usual comparative market analysis would indicate and sharply increased median and average prices.

More and more buyers are entering the market to buy homes for the long term, but they want to use the property as a short term rental until they are ready to move in for good.

“The # 1 reason people leave Sedona or sell their homes is to get closer to their children or seek treatment,” Wesselhoff said. “I get this call everyday from a former client or friend asking how much can they get for their house. They really don’t want to move, but they think if they sold their house now they could pocket $ 300,000 to $ 500,000.

“Finding a place to live after selling their house is not easy, so I tell them to stay where they are.

Sales have cooled

While the median price of a single-family home continues to break records, sales have slowed in this latest 90-day period.

“The last 12 month period saw 710 sales, an increase of 47% from 485 sales in the previous 12 month period,” according to Randy Crewse, with Arizona Prime Real Estate. “This is the highest number of sales ever recorded in a 12-month period. Faced with very strong demand, residential inventories have continued to drop 6% over the past 90 days. “

Sales of vacant land also increased during the year.

“Vacant lots have seen their best run since the ‘land rush of 2004’, with 222 sales compared to 54 in 2020,” said Grimm. “Prices, however, still haven’t matched this big jump. The median was a very healthy 25%, but still at just $ 242,250 – well below the $ 515,000 in 2006. Yet, with the supply dwindling, it’s only a matter of time before. that we don’t come back to that kind of price. “

“[Buyers] have to do their homework before buying land, “said Anderson,” because we find that some people who were buying land, their real estate agents haven’t educated them enough on the cost of things like a septic tank, a soil test and hire a contractor to do a topography.

“If buyers don’t get the best education, they get these packages and get unhappy. I asked a few people to go through the process and they asked me to put their property back up for sale after I bought it with another agent because they didn’t know it was going to be so expensive.

Mortgage rates

Record mortgage rates and a shortage of inventory keep the housing market strong in terms of demand.

“It’s a natural progression – everything is cyclical. As stocks go down, prices go up…. I think the current forecast for the next 12 months is pretty stable – a 3% price increase over the 38% price increases we saw last year, ”Wesselhoff said. “The absorption rate takes into account the number of homes sold each month and its link with the total number of homes. “

“A balanced market has six months of inventory,” he said. “So if we sell 50 homes a month, you have to have 300 homes on the market to have a balanced and balanced market. If there are less than 300, it is a sellers’ market; if there are more than 300 at this rate of sale, then it is a buyer’s market. Six months is the key. We’re two months old, so it’s good in a seller’s market. It can’t be much lower than that.

For those who work in Sedona and want to live here, affordable housing is almost non-existent and expensive. Patricia Saxton, an artist from Sedona, has rented a house in the village of Oak Creek for over three years. In March, the owner decided to move out and renovate his home, leaving Saxton with no place to live.

“I was given 45 days to leave. Inventories were low and prices were skyrocketing, ”she said. “I couldn’t find anything and contacted a friend who had a casita, and they let me stay there,” she said. “It took me over five months to find a place. I tracked the rentals and got online at the right time and found a perfect home for me.

Sedona Oak Creek School District superintendent Dennis Dearden struggled to find housing for the teachers he hired.

“One of the major problems is our school system,” he said. “With enrollment declining, it is difficult for young families to afford the average house price and recruiting teachers is a challenge. It is not difficult to find teachers. They look at the location, the scenery and / or the opportunity to teach in a very attractive unique school, and the salaries are very competitive compared to those in the Phoenix area. “

“But at the end of the day, once they get here they want to live in Sedona and they realize they can’t find a home here – there aren’t any homes available or it’s out of their range. price, ”he said.

Forecast

“Local securities firms tell us about a sharp drop in new receiverships in Sedona and across the state for June and July,” Grimm said. “Part of this could be attributed to a return to the seasonality of our old market, but there seems to be a cooling feeling.”

“And, we are seeing more and more list prices going down as sellers start to back off some of the overpriced,” he said. “However, multiple offer situations are still the norm for well-priced homes and even for some new vacant lot listings when they come on the market. One change, however, that we have seen with our clients is our growing success for buyers with loans competing with cash buyers for these properties. This is not only good news for these clients, especially with rates so low now, but it also opens the market to a significant level of pent-up demand from those in need of financing.

“They were largely shut out of the market, until recently, by cash buyers,” Grimm said. “Collecting them, in increasing numbers, keeps the market strong and healthy.”


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