Verde Valley Market Update– Is the Bottom in Sight?

To tell you that the Verde Valley real estate market has been slow this year,  would be a dramatic understatement.  To say that we are currently experiencing the slowest market the Verde Valley has seen in well over 10 years…..would be a  much more accurate statement.  And yes, prices have dropped since our 2005 highs.  But that’s the bad news, and in every cloud, there is always a silver lining…

Forget everything you have been hearing in restaurants, bars or by the coffee pot at work.  Forget what you heard on the news about the  nation’s real estate market.  While it will show you current trends nationally, it has very little bearing on the health of local markets.  Ours included.   If you are trying to glean information about the future health of the Verde Valley Real Estate Market on the national news, you are looking at the smallest part of our overall picture.  Real estate markets are LOCAL phenomenon's....and it is LOCAL conditions which will affect their health the greatest.  

Good information about real estate markets is always derived from facts, local facts, but very few people will look at the facts before making blanket statements.  Even our  local newspapers have always done a  poor job of covering the real estate market in our area.  So what is our market currently doing and what is likely to happen here in the coming years?  NO ONE can predict the future,  but we can look at the present and the recent past, and catch a glimpse of what’s to come.

Below is a  chart of the total amount of  local real estate sales that have occurred via the Sedona Verde Valley MLS.  Nearly all sales Realtors are involved in, will be recorded in this database.  It  does not include properties sold for sale by owner, which is usually 8-15% of all sales in any given market. 

TOTAL YEARLY SALES,  SEDONA VERDE VALLEY MULTIPLE LISTING SERVICE

Year     # of Sales        Dollar Volume

1996     1691              197,283,896
1997     1809              248,524,298
1998     1967              282,799,572
1999     2052              325,126,110
2000     2127              388,386,493
2001     2043              378,680,420
2002     2244              440,312,261
2003     2624              593,724,521
2004     3175              782,270,183
2005     3121              968,669,048
2006     1972              740,066,355
2007     1396              *Projected  

Lets look at the past few years a little closer….
SVVAR CLOSED SALES YEAR TO DATE
SEPT 1, 2005  2243 sold and closed, YTD
SEPT 1 2006  1439 sold and closed, YTD
SEPT 1 2007     931 sold and closed, YTD 

What you are seeing above represents a  60% drop in sales activity in our area in a two year period.
The project sales number for this year, located in the 1st chart was derived by taking the number of sales that have occurred so far this year (931 as of 8/31/07) , divided by the number of months, to arrive at a rough rate of consumption, YTD.  We can then figure out roughly how many more sales will occur this year and project closed sales for the year,  1396        (even with our expected influx of winter visitors, the holiday season is typically slower in our area for real estate sales...the  pace of closing sales we have been experiencing is unlikely to change dramatically). 

In other words, this year, 2007, Sedona & The Verde Valley will very likely have the least number of sales we have seen in over 10 years.   The severity and the quickness of this drop in activity, may actually turn out to be beneficial for our market in the long run….I’ll explain that more in a minute!

 Even with all the uncertainty in the mortgage markets and in real estate markets across the country, one thing, and one thing only, will effect the future health of our local real estate market more than ANY other. Inventory.  Period.
  
Unfortunately, we are still adding inventory to our market.  Simply put, people are putting property on the market, faster than buyers are buying it.  In June, there were 2910 active listings in the Verde Valley and 251 properties that were under contract.   Today, there are 3024 active listings and 180 properties currently in escrow. 

More competition, and fewer sales equals several more months of frustration for many sellers out there, especially if they refuse to open their eyes and ears and realize that their home is competing in an intensely fierce marketplace.

 If we do a little more figuring, postulating and speculating, we can assume that out of the 3054 listings         currently active,  that approximately 2500 of these listings will fail to sell this calendar year, unless we see a dramatic increase in buyer activity, or a decrease in inventory...and that is not likely to happen….Area builders and developers have a lot of projects currently in the works in our area, in various stages of development.  No question about it, new subdivisions aren’t going to help our current inventory overload at all…but this rapid

downturn might. 

Early in 06 a large developer backed out of a project in Verde Sante Fe, another backed out of a   project in Camp Verde.  Several others  have been postponed or scrapped.  Still others will develop at a slower pace, open fewer phases and build fewer spec homes as survival mode kicks in.  Whatever the reason, we may have delays in the production of new inventory…and that is good news! 
 Because we hit such a huge low this year...there is strong possibility next year will be just a little better.  We will probably see a few more sales and a few more buyers, though pricing may continue to slide as stretched sellers and speculators alike seek to sell, and other sellers are forced to follow suit to achieve their goals.  Stagnation or very slow improvement can probably be expected in our area, as a lot of new inventory is still planned for our area, and dirt is flying fast at a multitiude of area projects.
 We will probably even see the return of a few investors, as some PHENOMENAL deals are beginning to appear.  It is almost as if Walmart came in and did a price rollback to the beginning of 05 on a few I have seen come available lately….Remember, homes in Arizona have risen an average of 58% since the year 2000.  Though some segments of our market have lost  10-30% of their gains since 05, there is still a healthy net gain for our market overall, and plenty of people who are selling today are putting profits in their pockets.  It ain’t all doom and gloom!
 Also, don’t forget about  the 120,000 NET new people who will move to Arizona next year and all the baby boomers who are reaching retirement in the coming years.  Oh and one other thing, ask any old timer in Arizona what characterizes our states economy….booms and busts is what they will tell you.  And why should it be different?  As a state, we are in our infancy, and our growth spurts sometimes cause growing pains. 
 Instead of thinking of what could have been, sellers who need to sell, need to think of what could be.  What could I do to my home or land to make it more appealing than the competition?  What incentives could I offer?  What price could I live with?  Or , better yet, ….if I drop the price 5%, could I stick the money in a high rate CD and earn 6% and recoup the reduction in less than the year than my house may sit on the market while I wait to get that 5%?  YES!!!!!!!!!!!!
 If you or someone you know, could use a little creative thinking to help move their property, give us a call! If your thinking the time to buy is, Your right!  And we’d love to help! For more information, please visit our website, www.verdevalleyrealestate.com  Holly Grigaitis-Svercl and Ken Svercl, Mingus Mountain Real Estate 928-300-5228 holly@verdevalleyrealestate.com