Real Estate Review, January 2019.
At this time of year, everyone has the same question on their lips “Where’s the market headed in 2019?” and then the next question I always ask myself is “What are the best buys?” Let’s take a look at each of them starting with “the best buys”, which I believe are luxury homes and vacant land.
I define a luxury home as one that sells in the top ten percent, by price, of all residential sales. Currently that would include any home selling for more than about $950,000. For that price you could expect to be in one of our finer subdivisions, with the interior finishes of the home being of superior quality and extra amenities thrown in such as superior views, access to a pool, lavish outdoor patios for entertaining and some “smart home” features. All of this can be bought in some instances for as little as $320 a square foot of livable space. When you consider that the 2018 average sold price per square foot for all residential sales was $280 in Sedona and $250 in VOC, that is a bargain and below replacement cost!
Vacant land would be my second choice in the “best buy” category. We are currently experiencing a glut of inventory with vacant land and that is what’s holding back price increases – we have a twenty months’ supply on the market when a six months’ supply is considered to be a balanced market. However, it’s only a year or so ago that we had a thirty six months’ supply of land but the recent pick up in unit sales has quickly driven that number down; expect that trend to continue as buyers are forced to build rather than buy when they can’t find their dream home because of a lack of inventory. In an encouraging piece of news from Cottonwood, land prices there rose 65% in 2018 – maybe a harbinger of what to expect in Sedona?
As for what to expect in 2019, I believe the local real estate market will perform well. Last year, unit sales of residential homes were at their best since 2005 but will probably moderate from that lofty height because of rising interest rates which will make homes less affordable. To balance that out, the turmoil in the stock markets might make real estate a “safe haven” and consumer confidence appears to be holding up. I don’t see much room for the 11% price increases we experienced last year in the lower price ranges and my forecast would be for something in the 3% to 5% range.
This month’s Real Estate Review was written by Andrew Brearley…