What IS happening in the Sedona real estate market?
2021 has been a very exciting year. Although, it’s been more exciting for sellers and more frustrating for buyers. We have had more limited inventory and higher buyer activity in 2021. Sedona only has approximately 5,000 properties and a there are a lot of financially qualified buyers that are hungry to step into the market. Some buyers give up and walk away, feeling deflated and talking about the experience like a war story.
The buyer pool is larger and more aggressive than we’ve ever had in Sedona- And I do mean, EVER in Sedona. Our limited inventory that hits the MLS market and the off-market meets the aggressive buyer pool, which snatches those properties up, quickly grabbing them off of the market. This is keeping inventory lower than we’ve seen in over 10 years.
As a result, we have record-high buyer activity and we have extremely low inventory and it’s driving up the prices. We’re commonly seeing multiple escalation clauses from buyers, as well as 10 – 20 offers with 20%+ escalation clauses.
Many of these escalation clauses have high maximum price caps. In some cases, these buyers set no maximum- which by the way I would strongly discourage as this is a very high-risk way to purchase. It also often invalidates/voids a contract in Arizona, and it is a blaring rookie realtor mistake.
That being said, regarding those escalation clauses- let’s say for a property listed at $1.1 million, a buyer provides a $1.3 million offer with an escalation clause up to $2 million.
We’re actually seeing this aggressive escalation price VS listing price spread for properties that “check all the boxes”. I don’t just mean a property that buyers love. “Checking the boxes” can simply mean an investment property That will cash flow as a short-term rental or long-term rental or even a multi-unit. In these cases, we’re seeing high escalation clause caps, which is driving purchase prices way up.
Recently I had a client that was outbid with an escalation clause up to $1.825M on a $1.1M listing. Our offer was clearly very strong, but we landed in second position. This was largely due to these escalation clauses amid limited inventory. These situations are pushing prices up. As a result, final appreciation in 2021 was approximately 30%.
In 2022, appreciation is forecasted to be higher. Estimates are around 35% in 2022. Raised interest rates this year will clearly impact the appreciation, which will begin in March, likely with five rounds of raised interest rates throughout the year.
Final interest rates could be as high as 2 point higher. So obviously that’s going to impact things a little bit on the buyer side. But we’re still going to be holding firm to plus or minus about a 35% appreciation in Sedona in 2022.
Again, this is just supply and demand. Very low supply, very high demand. It’s recommended for buyers to attempt to get into the market before prices double again, as they have done in the last 3 years.
As you have more questions or if there’s anything else we can do for you- whether you are buying or selling- schedule a call with us, or just call us directly.