Spring Fever?
By: Roy E. Grimm, PhD
As seen in Sedona Monthly
2024 ended on a positive note giving rise to optimism for 2025. We expected a stable marketgrowing at a moderate pace as mortgage rates eased. Two-thirds the way through the 1st Quarter, however,it’s been a bit grim.Instead of declining, mortgage rates rose above 7 percentand could stayhigh indefinitely.Consequently, sales slipped sharply.Single-Family Residence sales through February were down 8 percent and the Median Recorded Selling Price for those sales was off by 12 percent. Adding insult to injury, homes took longer to sell.Days-on-Market rose 22 percent to 134.
Sedona’s experience reflects the national scene. Highly regarded Altos Researchis reconsidering its December projections. Their prediction for homes sales in 1st Quarter 2025is now minus 3 percent vis-à-vis 2024.Having projected a 3.5 percent increase in home values by the end of 2025, they now anticipate a “price compression” thatcould go down to 2 percent.In any event, Altos’s CEO, Mike Simonson, makes a strong case in such a soft market for pricing properties to stay ahead of what could continue to be a significant downturn in the market.
One of the most tellingdata points that Altos publishes in their weekly Market Activity Reports is the percentage of current listings that have had price reductions. Nationally, of late, that’sabout 33 percent. Phoenixis among the top ten cities in the country with 46 percent.The Sedona Area sits at 36 percent. But if we break that down to zip codes, 86336 ( the City of Sedona+ outlying areas )is 42 percent and 86351 ( the Village of Oak Creek) only 26 percent.
Altos also provides a Market Action Index scale indicating whether we have a Buyers’ or Sellers’ Market. 30 is the dividing point between the two. Overall, Sedona most recently earned a 32–a balanced market. But, if we go by zip code, 86336 is at 30 and 86351 is 35. So, by both of those metrics, sellers in the VOC are in a stronger position, just as buyers in the City are gaining the edge.
One caveat in considering early salesfigures: that data is a relatively small sample upon which to base more than tentative conclusions for the rest of the year. As we’ve seen, significant economic, political, and environmental developments can dramatically alter the real estate scene. For the moment, we’re receivingsubtle indications that the spring season maysee some improvement.The one factor, though, that hasstaying poweris inflation. Even withoutinflationary policies such as tariffs and immigration restriction, the costs of the burgeoning national debtprovide an ongoing basis for inexorable inflation.The time-honored investment strategy to hedge against inflation is to purchase tangible real property. Of course, the bonus of purchasing a home, unlike gold, is that you can live in your investment.
