YEAR
2006 WAS THE PAUSE THAT REFRESHES
The
2006 real estate statistics for Sedona and the surrounding Verde
Valley have finally been tallied. As many of us in the business
expected, they are not particularly pretty. The one notable exception
is the increased prices buyers were willing to pay both for residences
and vacant land.
Rather
than trot out a composite of mind-numbing numbers, let me relate
what they seem to indicate. First, understand that merely comparing
2006 to 2005 leaves you with the somber impression that we could
be in for more of the same in 2007. However, if you include the
years 2000 to 2004 in the analysis, you get a decidedly different
picture, one that would seem to point to a better than even chance
that a more upbeat scenario is likely to unfold in the months
ahead.
Let’s
use the greater Sedona area as an example. For six straight years,
from 2000 to 2005, real estate sales increased more than 150%
to $361,800,000. Most of the gain came in 2003 (36.8%), 2004 (17.8%)
and 2005 (23.7%). It was obviously not a sustainable pace, which
was confirmed by what happened in 2006. Reality caught up with
irrational exuberance, and Sedona suffered a sharp decrease (-22.1%).
Yes,
it hurt, but let’s examine the big picture more carefully.
During a period of seven years, real estate sales in Sedona grew150%+
for the first 6 years, followed by a 1-year decline of 22%. Overall,
one can hardly describe that performance as being shabby. Pessimists
can certainly raise the question, “What if it becomes worse?
What if the slowing trend continues through 2007?” My answer
to that is, “Where is the evidence to suggest that this
likely to happen?”
On
the contrary, the first official word on the economy’s overall
performance in the 4th quarter of 2006 came out on January 31
when the Commerce Department reported that GDP grew at a rate
of 3.5% for the quarter. Compare that increase with the first
three quarters of last year when the rate slowed from 5.6% to
2.6% to 2%, and you can clearly see there has been a dramatic
turnaround.
And
why not? Unemployment is down. Payrolls in the private sector
(outside of housing and manufacturing) grew faster in the second
half of 2006 than in the first half. Buying power received a big
boost by the decline in oil prices. Foreign trade is up. The stock
market is up. It would appear this upswing definitely has legs.
How
will Sedona be affected by all this?
Here
are my predictions. 2006 was the year that Real Estate paused
and took a deep breath. Overall sales volume hovered roughly on
a par with what it was during the second half of 2003 and the
first half of 2004. My sense is that for 2007 sales volume will
increase a moderate 11% to 14%. As for prices, despite last year’s
reduced number of transactions, demand remained strong enough
for prices to actually rise 18%. Will this upward surge in value
persist? Perhaps, but if it does, it will likely be no more than
a 10% to 12% increase.
So if you
are a Buyer or a Seller, plan accordingly.
View Sedona
Real Estate Newsletter Archives
|
