Sedona and Verde Valley Real Estate 2015 in Review
2015 is in the book and brought few surprises in the Sedona and Verde Valley real estate market. On the not much of a surprise side for the sixth straight year the number of sales of single family homes in the Sedona market has remained virtually unchanged, bouncing along at right around 400 sales per year. In the previous three years in spite of the number of sales being flat we had seen a significant increase in the median sales price averaging about 10% per year. However for 2015 we only saw a 2.3% increase in the median sales price from $427,500 to $437,500. We still end up with a 25% increase over the lows of 2012, better than most areas of the US.
Residential inventory has remained steady in the Sedona area, along with sales for the last three years, starting out each year in the 360 unit range and jumping up into the 420 range during the year. We did see a little bigger drop in 2016, to 347 units. I expect that we will see that come back up as we head into our spring selling season.
One of the surprises we did see in 2015 was the slowing of demand for vacant land in the Sedona area. After an increase in the number of transactions in 2012, 2013, and 2014 we saw a 15% drop in the number of sales in 2015 to 114 sales. Along with the drop in sales came a 10% drop in the median sales price to $139,000.
I anticipated a continued increase in vacant land prices and sales as we continued to see the median sales prices of residential properties rise. One of the impacts on land prices in the Sedona market is the continued increase in building costs and development fees, making existing homes still a bargain when compared to building a new home. For a construction cost in the $400,000 range you would be looking at an estimated $4,000 for plan review and building fee, non – utility development impact fee of $5,548 and sewer capacity fee of $9,757, fees totaling $19,305, that is significant.
Just a quick note on the foreclosure front. Foreclosures no longer play an important part or have an impact on the Sedona and Verde Valley markets. One of the most remarkable statistics that highlights that fact is in Verde Santa Fe, just outside of Cottonwood. In 2010 at the height of the real estate crisis, of the 93 sales that occurred in Verde Santa Fe in 2010, 59 of the 93 sales that year were either foreclosures or short sales. Of the 62 sales in Verde Santa Fe in 2015, only 1 was a distressed sale, YES!
One of the brightest segments of the Sedona market for 2015 was the condo and townhome market. As the median sales price of single family homes continues to rise, condos and townhomes become a more affordable entry point into the Sedona market. 2015 saw a 12.5% increase in the median sales price of condos and townhomes over 2014. The last two years has seen a $58,500 increase in the median price of condos and townhomes.
So what about the broad stroke influences on the real estate market for 2016?
Interest Rates: Quoting some of the experts out there:
“The benchmark 30-year fixed-rate mortgage will spend the bulk of 2016 in the low 4s and remain well below the 5% mark throughout the year,” says Greg McBride, CFA, Bankrate’s chief financial analyst.
According to Corelogic: Fed will probably raise short term interest rates by one percentage point gradually over the year. This is expected to cause mortgage interest rates to rise by around a half point, to around 4.5% for the 30-year fixed rate mortgage
All in all great rates near historic lows, we need all the help we can get.
Household Formation: According to Corelogic: “An improving labor market is expected to spur household formations in 2016, with 1.25 million new households expected. More households will spur demand for both purchases and rentals, but rentals will get the most pressure. With rental vacancies already at the lowest levels in 20 years, rents should be rising more. This could move some buyers from renting back into the market”.
More households means more buyers, more buyers should translate into more retiree sellers in California and the upper Midwest and a steady flow of buyers for Sedona and the Verde Valley.
Sales and Prices: According to Freddie Mac’s chief economist, Sean Becketti “Gradually higher mortgage interest rates will present an affordability challenge, but expect a strengthening labor market and pent-up demand to carry 2015’s home sales momentum into 2016. Expect house price growth to moderate a bit to 4.4% in 2016 driven in part by the reduction in homebuyer affordability and reduced demand as a result of Fed tightening. Housing activity will grow in 2016 despite monetary tightening. Expect total housing starts to increase 16% year-over-year and total home sales to increase 3%”
We can expect steady demand for 2016. I expect to see another year of moderate price increases although there could be stronger upward pressure if we do not see the seasonal increase in inventory.
Just the Facts:
Sedona area: The median price of a single family home rose 2% in 2015 over 2014. The number of transactions remains steady at around 400 single family sales per year as it has been for the last six years.
Vacant land transactions for 2015 came in at 114 with a median sales price of $139,000 down 10% from 2014. There is a three year supply of lots for sale. If residential inventory remains low that will help provide some strength to the land segment of the market.
The luxury market, over $1,000,000, softened in 2015 with sales coming in at 26, down from 31 sales in 2014. The last 6 months of 2015 saw this segment of the market really slow down with just 8 sales in the last 6 months of the year. Inventory of homes listed over $1,000,000 remains steady at around 65 listings.
The $1,000,000 to $1,500,000 price range is relatively strong with 17 of the 26 sales occurring in this price range.
Cumulative days on the market saw a small decrease to 125 days for 2015. With prices remaining steady and demand steady I do not expect to see much change in the median time on market for home sales in 2016.
The median sales price for Condos and Townhomes in the Sedona area rose to $270,000 for 2015 a 12.5% increase over 2014.The number of transactions for the last 12 month period is 99, up from 90 in 2014.
The median price for mobile homes took a 14.5% increase in 2015 over 2014, to a price of $180,000, equaling the median sales price of 2009. The number of sales remained steady at 41 sales in 2015.
The median sales price for single family homes in the Camp Verde area for 2015 was $184,000 up 7% from 2014. The number of transactions is up to 93 from 84 in 2014.
Lake Montezuma and Rimrock:
The median sales price for single family homes in the Rimrock and Lake Montezuma area for 2015 was $145,950 up 12.6% from 2014. The number of sales was down 16% to 68 sales in 2015 from 81 in 2014.
Cottonwood and Cornville:
The median sales price for single family homes in the Cottonwood and Cornville area for 2014 was $203,000 up 1.5%. The number of transactions was up 13.3% to 509 sales in 2015.
The Bottom Line: With interest rates remaining at near historic levels, household formation on the rise and the number of sales steady over the last 6 years, I expect more of the same for 2016. There should be continued upward pressure in prices as we have a steady flow of buyers from our feeder locations in California and the upper Midwest. If inventory does not pick up we could see a stronger upward movement in prices.
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