E-Newsletter
December 2006

Looking Ahead to 2007

As you read this column you should understand that not only are my 2007 predictions nothing more than educated guesses but also my 2006 predictions were for the most part pretty useless. That being said, it’s always fun to speculate on the future so I will give it a try.

Reviewing 2006 and my predictions then will lead us into the current climate for my 2007 predictions. I stated a year ago that I thought units sold would decrease again slightly and I was partially correct. Units sold did go down but a 35% drop is hardly a “slight decrease”. I also thought that sale prices, meaning home appreciation, had peaked and would rise at best a modest 3-5%. That one actually is probably pretty close to the truth depending on which statistics you look at or how you look at them. Home sales above one million stayed pretty strong throughout 2006, even on par for the record year in 2005 but it was homes below one million that took a sharp downturn. Because of that the average price of a home sold in Sedona is now well over $600,000 versus $565,000 for 2005 but again the homes sold over one million dollars makes up a much larger portion of the overall market this year than they did last year. Ok, so on paper my predictions didn’t look too bad but I’m sure you noticed that I, nor anyone else, saw such a rapid downturn in the market, as was what actually happened.

One of the biggest areas, which showed a dramatic decline, was vacant land sales. Sales plummeted in that area at an even larger margin than the overall market. I believe that most of what happened in both the land and residential markets was sticker shock. Buyers who had been investigating Sedona for some time and were on the verge of making the commitment to buy saw land and home prices rising on an almost monthly basis and any in many cases it priced potential buyers right out of the market. In land sales people started doing the math and realizing that finding a good quality builder was tricky enough but then add a half million dollar lot to the equation and suddenly the interest in building a home dropped off almost overnight. Not that new construction has disappeared but you are certainly seeing far less of it than you did a few years ago.

So with all of that being said this is what I anticipate for 2007. Home appreciation will remain flat (sorry owners, and I am one of you) there simply isn’t enough buyer demand to fuel another rise in values at this time. We may see some small increases in the fall if the spring is stronger than what we expect but overall the prices will most likely remain flat. Having said that, I do see sales to increase both in the residential and vacant lots (but only if sellers of vacant land come to the same realization that residential sellers came to in the last few months). The market has stabilized enough that buyers are now believing that Sedona is once again affordable, at least as resort communities go. That should translate into a modest increase in units sold. Something in the range of a 5% increase sounds about right to me. I think vacant land may show about the same type of increase, but again, that would only occur if selling prices remain the same or actually decrease a little.

One of the real interesting possibilities that some agents are talking about is the chance that there is some real pent up buyer demand and that once the Holidays end we may see a busier than expected spring. I hope this is true and do believe there are some signs that do indicate this is possible. But I also remember back to this summer when the well dried up and we all thought the buyers would come back in the fall and we all know that didn’t happen either. However, back then there were only signs of a falling market and right now it does appear that we may have bottomed out in September and a strong bounce back is not out of the question.

No matter what 2007 brings we can all look forward to the coming years in Arizona. Baby Boomers will be retiring and looking to warm weather states like Arizona to spend their twilight years in (or at least their twilight winters). In addition to areas like Phoenix, Tucson, and Sedona other rural areas may reap some of the benefits of that as well. 2006 may be going out like a lamb but here’s hoping 2007 comes in like a lion or at least a bobcat, or even a really mean housecat. Have a Merry Christmas, Happy Hanukah, and Happy New Year.

Tod Christensen
Designated Broker/Vice President
Coldwell Banker First Affiliate