3rd Quarter Real Estate Market Update for Sedona and the Verde Valley, 10/31/08
Lake Powell, Page Arizona
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. Holly Grigaitis-Svercl and Kenneth Svercl, Minugus Mountain Real Estate, 928-300-5228 holly@verdevalleyrealestate.com ken@verdevalleyrealestate.com
Watson Lake, Prescott, Arizona