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.
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