3rd Quarter Real Estate Market Update for Sedona and the Verde Valley, 10/31/08

2008 3rd Quarter Market Update for Sedona and the Verde Valley

Slow and sluggish continue to be the words that best describe the Sedona Real Estate Market as well as the real estate markets in all other Verde Valley communities.  Inventory has not seen a great increase or decrease over the last several months and as of 10/1/08, we have 3158 active listings for sale in Verde Valley communities:  1406 vacant land parcels and 1597 homes are currently for sale.
The 3rd quarter of 2008 saw a total of 242 sales closing escrow.  206 homes sold and 28 vacant land parcels sold, while only 8 commercial properties were sold.  In other words, 87% of  homes and 98 % of land parcels failed to sell during the 3rd quarter.
Foreclosures and pre-foreclosures currently represent about 6% of the listing inventory in the Verde Valley, however, the vast majority of these are homes, so in actuality, foreclosures and pre-foreclosures represent approximately 11% of the homes that are currently for sale in the Verde Valley.  Currently, foreclosures and short sales represent over 30% of the pending contracts in the Verde Valley-  and there are many, many more that will be coming on the market in the coming months.

Because we think it is so important for you to have a historical perspective on the market,  Here are the     quarterly sales for the past few years in the Verde Valley once again.
1st quarter  2005            727 closed sales
2nd quarter 2005            966 closed sales
3rd quarter  2005            786 closed sales
4th quarter  2005            591 closed sales
1st quarter  2006            567 closed sales
2nd quarter 2006            570 closed sales
3rd quarter  2006            561 closed sales
4th quarter  2006            358 closed sales
1st quarter  2007            314 closed sales
2nd quarter 2007            406 closed sales
3rd quarter  2007            304 closed sales
4th quarter  2007            234 closed sales
1st quarter  2008            203 closed sales
2nd quarter 2008            280 closed sales
3rd quarter  2008            242 closed sales

We need to see an average of 400– 500 sales per quarter in the area before our market will once again feel “normal.” As much as our market was artificially inflated, it now appears to be artificially deflated,  And prospective purchasers of area real estate should really consider acting sooner than later.  Why?

1.  Sales in our area may have hit bottom in the first quarter of 2008.
2.  Inventory has not increased.
3.  Buyers who have not owned a home in the last 3 years now qualify for 7500$ tax credit so long as they purchase prior to July 1, 2009.  This will most definitely spur a number of sales nationally, which will aid those who need to sell prior to relocating here.
4.  Some homes can now be purchased for less than they would cost to build.
5.  The election is only a few days away-  A whole lot of uncertainty in the minds of the American people will disappear early in November.
6.  The year long, downward spiraling credit crunch is soon to get some relief, thanks to the “Wall Street Bailout,” currently under debate in Washington.

Still, we can likely expect a steady stream of foreclosures in our market area for the next several months and maybe for the next few years, unless the “bailout” becomes reality.  Why?  Two words.  Option ARMs.

Option Arms are adjustable rate mortgages that allow the borrower to choose the payment they make each month, with the lowest payment available resulting in negative amortization.  This means that every month, the homeowners mortgage balance increases rather than decreases.  Couple this with declining home prices and homeowners who took out these mortgages will be in a very bad place if they cannot afford the new payment at the higher rate.  Option Arms usually reset in 3-5 year increments, and many will reset in the next few years.

Interest in area real estate seems to wax and wane with the nightly news.  A few weeks ago, when interest rates took a very brief one percent tumble to 5.5%, we saw a HUGE surge in internet activity on our listings.  There is an awful lot of pent up demand out there.  People want to buy-  People want to live here- they just aren’t sure about their economic futures, and delay purchasing big ticket items, unless the deal is simply irresistible.  A half a percent drop in rates opens up the market to a whole new set of buyers by making payments lower, which makes qualification easier.  Today, interest rates are below 6%-  historically, that is a FANTASTIC interest rate!
So how will the “Bailout of Wall Street”, benefit us on Main Street, Arizona?  The government will begin buying mortgages that banks cannot currently sell.  That will allow them to have more money to loan to prospective homebuyers and small businesses and this will eventually restore a lot of stability to the financial markets.  As the owner of the mortgages, the government will have the sole authority to rewrite those loans in an effort to keep people in their homes and stem the tide of foreclosures in the marketplace.  At this point, it is not a bailout of Wall Street– it is a bailout of your neighborhood home values and retirement funds.  Stable financial markets are of utmost importance to the overall health of our economy.

Banks and consumers have failed miserably in so many ways.  Banks failed to use good judgment in giving loans– consumers failed to use good judgment in obtaining loan products and then meeting the obligations they promised.   All were betting on the market.

Banks continue to fail miserably at preventing foreclosures– we hear countless accounts of homeowners who try for months to obtain loan modifications or short sale agreements– this is largely because the loan servicers need the approval of the loan owner…and this is not an easy task as the mortgages are owned by numerous individuals and entities who all must agree to the new terms.  The banking system is simply not set up to handle the volume of problem loans they currently have and if they modify these mortgages without the consent of the investors, the banks run the risk of being sued by the investors.  The mess we have now, looms so large, the government must step in-  the alternatives are potentially very ugly.  Credit fuels small business and business expansion-  and business expansion fuels the health of our economy.  Nearly 80% of the jobs in America can be attributed to small business.

As one of the hardest hit states in the housing crisis, Arizona sure could use a little good news.  It is estimated that 1 in 18 Arizona home owners could face foreclosure in the coming years.  Keep tabs on our blog and subscribe to our blog on the left to be sure you are updated on the Sedona Real Estate and Verde Valley Real Estate Market!  Feel free to post a comment or question.

History of Social Security

Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program. He promised:
1.) That participation in the Program would be completely voluntary.
2.) That the participants would only have to pay 1% of the first $1,400 of their annual incomes into the program.
3.) That the money the participants elected to put into the program, would be deductible from their income for tax  purposes each year.
4.) That the money the participants put into the independent “TrustFund” rather than into the general     operating fund, and therefore, would only be used to fund the Social Security Retirement Program, and no
other Government program.
5.) That the annuity payments to the retirees would never be taxed as income.

Since many of us have paid into FICA for years and some are now receiving a Social Security check every month — and finding that you are getting taxed on 85% of the money you paid to the Federal Government to “put
away,” for you, you may be interested in the following:

Q: Which Political Party took Social Security from the independent “Trust” fund and put it into the General fund so that Congress could spend it?
A: It was Lyndon Johnson and the Democratically-controlled House and Senate.
Q: Which Political Party eliminated the income tax deduction for Social Security (FICA) withholding?
A: The Democratic Party.
Q: Which Political Party started taxing Social Security annuities?
A: The Democratic Party, with Al Gore casting the “tie-breaking” deciding vote as President of the Senate, while he was Vice President of the U.S.
Q: Which Political Party decided to start giving annuity payments to immigrants?
A: That’s right! Jimmy Carter and the Democratic Party. Immigrants moved into this country, and at age 65, began to receive SSI Social Security payments! The Democratic Party gave these payments to them, even though they never paid a dime into it!

Then, after doing all this, the Democrats turn around and tell you that the Republicans want to take your Social Security away!  And the worst part about it is, uninformed citizens believe it!

Bob Fennell
Historian – Teacher – Philosopher – Humorist
1637 Kestwick Drive
Birmingham, AL, 36225

2008 Second Quarter Update

The real estate market in Sedona and the Verde Valley continues to limp along at a snails pace, though sales activity in the area has definitely increased over the first two quarters of 2008:  But, we are still a long ways away from having healthy market activity.   First, sales volume in our area has not been this anemic since prior to 1996.  Unfortunately, I can’t go back in the records to tell you when was the last time we saw so few sales in our area,  because our local MLS only became computerized in 1996!  Here are the actual numbers from sales in the area over the last 12 years.

Year     # of Sales        Dollar Volume

1996     1687              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     1261              458,545,123
2008      612               202,789,660       *YTD, 8/24/08

We will likely close this year with fewer sales than were recorded last year.  These numbers include all the communities in the Verde Valley:   Camp Verde, Clarkdale, Cottonwood, Cornville, Jerome, Lake Montezuma, Rimrock, Sedona and the Village of Oak Creek.  Out of the 612 sales recorded so far this year, 496 of them were homes, 94 were land, the remainder being  commercial or multifamily properties.
Currently there are 3074 active listings in the Verde Valley, – and 157 properties currently under a sales  contract.  In other words, little more than 5% of area offerings are under contract. This will be the worst year on record in terms of number of sales.
Foreclosures and short sales now comprise 5% of the listing  inventory that is currently available throughout the Verde Valley, and that number is growing weekly.  24 new foreclosures and short sales were listed last week alone.
Some of the prices offered are AMAZING.  How about a site built home in Sedona for $117 dollars per square foot?  Or maybe a 1980’s site built house in Camp Verde for  39,000?  How about a 2100 sq ft Santa Fe Style house with granite counters and tile floors in Rimrock for 185K??  Yep,  these are all genuine foreclosure and distress sales recently recorded in the Verde Valley– and local sellers who are in distress must compete against them.
Land foreclosures are just beginning to appear throughout the area– and the deals on these will be phenomenal.  Why?  Very few banks are making land loans– so these foreclosures must be purchased with cash.  Prices will be dramatically below market in order to attract a cash buyer.

We now have a place on our website where our clients can search ALL the foreclosures and short sales throughout the Verde Valley.  We will update this information DAILY.

I have printed this before, but I thought it worth printing again.  This is a breakdown of quarterly sales for the past few years.

1st quarter  2005            727 closed sales
2nd quarter 2005            966 closed sales
3rd quarter  2005            786 closed sales
4th quarter  2005            591 closed sales
1st quarter  2006            567 closed sales
2nd quarter 2006            570 closed sales
3rd quarter  2006            561 closed sales
4th quarter  2006            358 closed sales
1st quarter  2007            314 closed sales
2nd quarter 2007            406 closed sales
3rd quarter  2007            304 closed sales
4th quarter  2007            234 closed sales
1st quarter  2008            203 closed sales
2nd quarter 2008            280 closed sales
3rd quarter  2008            125 closed sales  *YTD 8/24/08

So what does all this mean to you?  If you are a seller, have patience and know that there are a lot of other people in the same boat as you.  How much patience?  2.5 years worth unless your property is among the VERY best deals on the market.

Buyers–  Get it while the getting’ is sooooo good!

2008 Sedona Verde Valley Real Estate Market Forecast- January 2008

Back in late November, Ken and I attended a economic forum whose sole purpose is attempting to forecast the climate of the Phoenix and Arizona housing market  for the coming year.   Lead by Elliott Pollack, a nationally renowned economist who resides in the Phoenix area and currently serves as the economics department for Maricopa County, the forum also contained speakers from some of the leaders in the industry such as Cushman and Wakefield, Capital Pacific Homes, Grubb & Ellis, Land Advisors, The Alter Group and CB Richard Ellis.  To follow is a synopsis of their thoughts for the Phoenix housing market and the national economy in 2008.

2008 is expected to be a tough year for the American consumer, though Phoenix and Arizona are in a relatively good position and will again outperform the nation in job growth and will continue to lead the states in population growth.  Because 2008 is expected to be a tough year for the American consumer, it will also be a tough year for the American economy.  While troubles in the housing sector will spill over into other sectors of the economy, the psychology of our nation as a whole will have a huge effect this coming year, and will probably have a larger effect than the true fundamentals of the underlying economy.

So how does your and your neighbors “mood” effect the economy?  For the plain simplistic reason that you may not be feeling as wealthy as you have in the past few years, and that may make you less likely to spend your money on big ticket items and luxuries.   Shrinking real estate prices in many locations across the country equates to many as a reduction in net worth, which translates into a reduction in spending and holding off on major purchases.

So what…big deal, right?   Absolutely.  In 2006, one out of every seven dollars floating about in the American economy was a equity dollar, spent by a consumer who took it out of their home in the form of an equity line or other refinancing product.  The slowing or dead stop of appreciation and tighter lending guidelines in many parts of the country have officially turned off the lights and cut the power to the music of the great refinancing party.  The boom those dollars added to our economy are now gone, and when we remember the fact that approximately 70% of our American economy is based on the daily activities of each and every American, we have a recipe for a slow, stagnant year for the economy.  In our economy, it truly is a matter of buy or die.

The chance of a recession in 2008 is about 50-50…..So go out today and buy yourself a ridiculously high priced cup of coffee, see a movie and order out for dinner.  Buy yourself a new stove, car or….a nice new house!  The American economy is counting on you!

Arizona’s peak housing market, in terms of sales and prices occurred July 2005- January of 2006 (about the same for the Verde Valley).  A normal supply for the Phoenix area is about 30,000 homes.  Currently, there are about 55,000 homes on the market in the phoenix area, 20,000 of which are currently vacant and unoccupied.  Pricing has cooled substantially in some areas, while going up 2-3% in select zip codes.  Pollack estimates that currently, 106,000 homeowners and investors in the phoenix area are upside down in their homes, owing more on them than they are currently worth.

There is only one factor which will matter in the 2008 Phoenix real estate market, Inventory and how much additional inventory debuts on the market in the coming year.  It all boils down to supply and demand.  The same can be said for the Sedona / Verde Valley real estate market.

Due to the great amount of speculation which occurred during the boom years, additional inventory for Phoenix in 2008 is a completely unknown amount.  Pollack estimates that the Phoenix area in 2008 could have anywhere from 30-50,000 extra housing units floating about in the market, which will certainly mean hard times for many small scale builders in the area.   Currently, the Phoenix Metro area has a 14 month supply of homes, which means it will take a over a year to sell all the homes currently on the market today (Sedona and the Verde Valley currently have a 23 month supply).   The peripheries of Phoenix have been hit the hardest, both with substantial reductions in pricing and lots of excess inventory currently available.  These are the areas in Phoenix where vast amounts of speculation and new construction took place during the boom years.  In other words, buyers should look for and will find a lot of incredible bargains in areas where a lot of new construction exists, which is mostly on the peripheries of the Phoenix Metro area.

Residential raw land prices have plunged on the peripheries of Phoenix.  In fact, a few of the panel members said their companies were valuing some of their raw land holdings at zero dollars…because it will cost more dollars to develop the raw land than the individual lots can be sold for.

Pollack and other panel members agreed that it will be 3-6 years before the Phoenix housing market begins to once again resemble a normal market.  Buyers will continue to be in the drivers seat, and call all the shots.

Pollack and other panel members offered advice to home builders, speculators and investors who purchased at the height of the market in 2005 and the beginning of 2006.  Forget your profit….it does not exist.  Forget recouping your interest.  The only thing you should be concentrating on is the preservation of capital.  Period.  Pollack said, “Ask yourself if you want to swallow a moth ball, or a basket ball, and then make your decisions accordingly.”

Builders in the area have already heeded the advice.  $50-70,000 discounts on newly constructed homes as well as 20% commissions to brokers are occurring in some areas.  Some builders are selling homes below replacement cost, and turning little to no profit.

Harsh words, but very sound advice, given the current conditions.  Panel members also recommended builders cut production of new units in the coming year.  New permits in the Phoenix area for 2004 and 2005 were 65,000 each year, and only 45,000 new units were needed.  The first 6 months of 2007, the phoenix area saw more new home permits, than home sales.

Advice to listing brokers of Arizona real estate was  “Ask your sellers if they want a 90 day list price or a one year list price, and if they insist on listing higher than those numbers, ask for a 3-5 year listing.”  In other words, sellers will need to price their home very competitively, if they haven’t already.

Buyers and savvy investors of Arizona real estate get a big green light in 2008, and will find some amazing bargains.  While it is impossible for anyone to determine exactly where we are in the “U” of a down market,  Pollack said point blank that “fortunes, absolute fortunes will be made by real estate investors buying in Arizona in 2008, 2009 and 2010….fortunes will be made.  Market timers looking for the absolute bottom always fail, incredible opportunities exist for real estate buyers and investors right now….. Interest rates are low, plenty of money is available….. financing may tighten considerably in the coming years.”

Arizona received 170,000 NET new residents in 2007, the majority of which settled in the Phoenix Metro area.   Though that number is expected to shrink in 2008 as stalled housing markets in other parts of the country will slow the wave of incoming residents, the valley of the sun still will need to add an average of 45,000 new housing units in the metro area to house all of our new residents. In other words, A whole lot of homes will still be bought and sold in Arizona and the Phoenix area in 2008.  Sellers will just have to woo buyers more with upgrades, concessions and, of course, the best trick in any sellers bag….a good, fair price!  Internet marketing will also be crucial to a sellers success, as many of Arizona’s 2008 real estate buyers are currently freezing, shoveling snow and scraping ice off the windshield in another state.

Arizona real estate buyers will find their best deals on existing resale homes, because many of them can be bought below replacement cost.  That will be the key to finding a good value for home buyers in 2008.  If you can buy it for less than it would cost to build today, you will weather the market just fine.  Buyers who prefer new construction will find subdivision reps. bending over backwards with enticing concessions, upgrades and deep discounts.

Traditional, longer term investors will find incredible opportunities:   once again you can find rentals that cash flow, a few well priced foreclosures and fixer-uppers and raw land at an extreme discount.  Arizona investors should look to the peripheries of the metro areas for bargains on land,  in areas that are close to being built out and have a relatively small amount of vacant land left available for development (like Sedona and many pockets of the Verde Valley).   Pollack and other panel members expect builders to be dumping land inventories in the next 24 months.  Although there is a huge oversupply of vacant land in the entire state of Arizona, Northern Arizona is expected to fair better than the metro areas, as many Northern Arizona communities are approaching build out.

And by the way, interest rates as of today on a 30 yr fixed rate loan just dropped to 5.5%  WOW!  Buyers! This is no longer a market to be scared of, this is a market to take advantage of!  Give Ken and I a call or send us an e-mail a call to help you find some exceptional deals here in Sedona and the Verde Valley! Holly Grigaitis-Svercl and Ken Svercl, Mingus Mountain Real Estate 928-300-5228 holly@verdevalleyrealestate.com

2007 Market Update

I really did not want to write another issue about our area real estate market, but I wanted to let you all know that we are actually seeing the very first signs of a recovery in our area.  Now, before I go and get everyone excited, allow me to say this:   the recent changes may just be a fluke, an aberration and may simply be attributed to the time of year (winter visitors, holidays), but whatever the reason, real estate sales activity is FINALLY picking up.

Just how bad was this past year?  Ask just about any agent in our area!  In 2005, at the height of our market, there were 977 agents in our local association.  We are now at 834 agents. 143 agents have left this business since the height of our real estate market.  Sedona Verde Valley Association of Realtors sales statistics for agents in our area look something like this for 2007, year to date.

# of agents who have not had a single sale ALL YEAR in our MLS in 2007, YTD-  306
# of agents who have sold only 1 property this year-  112
# of agents who have only sold 2 properties this year- 104
# of agents who have only sold 3 properties this year- 60
# of agents who have only sold 6 or less properties this year – 705
# of agents that sold less than 1 million in total transactions so far this year- 583
# of agents that have sold less than 2 million in total transactions this year- 709
# of agents who have sold 11 or more properties this year- 63
# of agents who have sold 20 or more properties this year- 11.  Fortunately, this is the category Ken and I fall into for this year…but we had to work 3 times as hard to make it happen.  So if we look dog tired…we are!

If we figure that the average commission paid was 3% per agent and that the typical split with their broker was 80%, well over half of the agents in our association have made less than 24,000 this year selling real estate, BEFORE EXPENSES!  Certainly doesn’t seem like a very glamorous business, does it?  We can certainly expect that many more agents will be getting out of the business…if they can make more money at Home Depot, why wouldn’t they?

I have heard a rumor that our association is already planning our 2008 budget to have 150 or so less agents.  I have a feeling that number may be much higher if a shift in activity does not occur VERY soon.  And unfortunately, we are already losing GOOD reputable agents…either via economic forces or as a result of overall negativity in the market.  I had told someone over the summer that I was surprised I am not wearing much smaller pants this year, after all the various people who have taken a chunk out of my posterior this year! Buyers are unhappy because they wonder if they paid too much… and sellers are unhappy because they could of gotten so much more…. Agents are the messengers of market conditions….And we all know who is the first to get shot!  It has been really, really ugly out there overall.

So… if you know a few of the GOOD REALTORS in our area, give them ALL a call and say “Hi,” or “Thank You”…write them a letter of recommendation, if they have done a good job for you in the past.   Let them know that you are trying to refer business to him or her, or that you are planning to sell or buy soon and that you plan on using him or her as your agent.  Little bits of encouragement at such a difficult time like this can mean the world! Tell your friends, business acquaintances and family members who may be interested in buying or selling that you know a great agent they should call…..Kind words or referrals from a former or future client will mean the world right now to any agent battling this market, and your efforts may just help keep a few more good agents in this business!

THE GOOD NEWS- Inventory seems to be stabilizing, and has even dropped about 1%.  In the September market update, I had told you that the number of active listings was 3024.  That number had increased to over 3170 listings, and today, we have a total of 3130 active listings available via the Sedona Verde Valley Multiple Listing Service.  But what makes me think we maybe seeing a slight turn of the tide is the fact that the number of pending sales is picking up and our office, which has felt more like a graveyard than a real estate office since mid-summer, is now coming alive again with the hustle and bustle of buyer traffic.  Our office is not the only office experiencing a recent pick up…it appears to be market wide. The worst may be over, or it may be simply a function of the time of year.    The drop in number of listings may simply be people pulling their properties off the market for the holidays, hoping to try again in the spring.  The recent influx of area buyer activity may be due to our winter visitors, who start streaming in a few weeks before the holidays.  The good news is, many will come and go in the next few months, and some will most definitely purchase property before returning home!!!!

In a few more weeks, I will be attending the annual market forecast seminar for 2008, hosted by Renowned Arizona Economist, Elliot Pollack.  Maybe he, and other industry leaders can offer us some additional good news about the prospects for 2008.  Until then, have a truly wonderful Thanksgiving.  Be thankful for your health, the love of your family and friends and all the other things that truly matter in life.  The market is merely in a cycle, and good times lie ahead,…. adversity can only make us stronger.  Holly Grigaitis-Svercl and Ken Svercl, Mingus Mountain Real Estate 928-300-5228 holly@verdevalleyrealestate.com

2007 Real Estate Market Forecast

Every November, I attend a seminar, lead by Elliott Pollack, that forecasts the future of Arizona’s real estate market. Elliott Pollack is a well respected economist, who lists Maricopa County among his many clients. He is frequently quoted by the Arizona Republic as an authority on State and National Economic Issues. VP’s of the largest home builders in the Phoenix area, Pulte (Del Webb) and Trend Home also spoke.

Most of the information contained herein is, of course, geared to the Phoenix metropolitan area, but we can consider ourselves a microcosm, if not a very distant suburb!


Firstly, to understand where we are now, we must understand what got us here in the first place. The past few years, Arizona has simply had a huge shortage of new homes available for purchase, and then, a very short time later, a huge oversupply.

Arizona has over 120,000 new people moving here each year from other states. To house all of these people, Phoenix needs to add 45,000 newly built housing units each year. In 2004 and 2005, 65,000 units were built each year.

The majority of this inventory was absorbed very quickly until the last half of 2005 and beginning of 2006 when many new subdivisions began selling produc. THAT CAUSED the “slowing” of the market. It is no coincidence that Phoenix currently has 44,000 homes on the market. In 2004 and 2005, they overbuilt the area by 40,000 homes.

But it wasn’t the market that slowed, it was simply that the inventory pendulum swung in the other direction, rapidly. We went from shortage, to massive oversupply. Suddenly, there were more homes than buyers as 40,000 extra homes were dumped on the market (Think of all the new subdivisions that have recently opened in this area). This also coincided with every “day trader” investor trying to dump their inventory, and cash in on the supply shortage price increases.

What happens when a vendor wants to clear out his warehouse of excess supplies? They hold a sale…..and New Construction in Arizona is currently on a blue-light special.

Builder Activity

Pulte homes, like many area builders, are not currently acquiring more land and are attempting to sell excess land inventory. Pulte has over 40,000 lots of nventory, in various stages of development. Willis Martin, the Vice President of Land Acquisitions for Pulte, openly admitted there were several subdivisions that Pulte was “upside down in,” meaning they were going to lose money on the projects, rather than turn a profit. “…Take the loss and move on,” was Martin’s response on how they would handle these projects.

Phoenix area builders (as well as many local builders) are currently offering huge incentives to buyers as well as their real estate agents. Buyers are cashing in, as builders scramble to unload inventory. 10-20K upgrade packages are now included. You might get a free pool, or a waiver of lot premium. Last minute closing table discounts are becoming common as well as other last ditch efforts to tempt buyers willing to walk away from their earnest money. Many builders in the Phoenix area have halted all production of spec homes in an effort to reduce inventory.

After reading all of this, would you believe me if I said that the year 2006 was the 3rd best real estate market the Phoenix area has ever seen? It’s true. And the same goes for this area. Sales figures for 2006 in this area are very comparable to 2003…which was an excellent year for real estate in this area, and the 3rd best on record. Please be sure to tell that to everyone you hear grumbling about the market!

Pricing will probably stabilize at some point this year, but just like the Phoenix market, when that will happen here will depend largely on new inventory. Most likely, area developers will need to under build for a little while, until some excess inventory can be absorbed by the newcomers to the Verde Valley.

Local sellers should be aware that we have returned to normal marketing times in the area, home sellers should expect a 3-6 month time frame, and land sellers should count on 6 months to a year. Double this if your home or land is in one of the more rural communities of the Verde Valley. Pricing will be quite crucial to achieving your goal in 2007.  You may be directly competing with 50-80 other homes similar in size and price to yours.

Sellers will also have to keep in mind how much less affordable homes are in 2007, and be realistic about the number of buyers who come looking. In the year 2000, 70% of AZ households could afford the average home in Arizona. Today, that number has dwindled to 28%. That is the percentage of Arizona households that can afford the AVERAGE (220K) home. That number dwindles exponentially once we inch the sales price above the state median priced homes. Luckily, we are a relocation market.

Buyers can expect to find some EXCELLENT deals in the Verde Valley in 2007, as investors, builders and cash-strapped homeowners seek to sell in a highly competitive arena.

The good news is, Pollack expects that real estate markets will perform very well in rural areas of Arizona for decades to come, fueled by tourism, retirement and second home markets. The baby boomers are coming and long term real estate investors and owners in the Verde Valley will reap the benefits for years to come!!!

National Economy Forecast-2007

Since Arizona’s real estate market depends on folks relocating to warmer climates, it helps to have a picture of what the national economy may look like in the coming years.

The next few years we are expected to have strong employment coupled with increasing wages. According to the Blue Chip Forecast, growth will slow from 3.5% to 2.7% as consumer spending slows from previous years. One of the major reasons consumer spending will slow is that people have spent their excess money, along with excess equity. Currently, 1 out of every 7 dollars in the US economy is an EQUITY dollar, money that was put into a consumers pocket by taking it out of their house.

Oil and Gas prices will remain high and unstable. He explained the world’s oil supply exists in the world’s “Bad Neighborhoods.” In 2001, Oil sold for an average of 20$ per barrel. In 2006, it hovered around $70 a barrel. While high gas prices greatly effect businesses by squeezing profits and cutting into budgets set, most households are relatively unaffected. Pollack pointed out that most households spend 5% or less of their monthly budget on energy and a 20% increase in oil prices only equated to an additional 1% increase of annual income expenditure.

A recession is not very likely for 2007, (1 in 4 chance according to Pollack), though may occur in 2009-2010. Democrats taking power will have a positive effect on the economy as government will do little to change the status quo as opposing forces, gridlock the legislation until the next round of elections.

Holly Grigaitis-Svercl, Associate Broker

Multi-Million Dollar Producer, Partner

Cottonwood Real Estate