What Are You Waiting For?
Today’s bottom line is this: Home prices are still holding on to the tremendous gains made over the past two years.
Summertime is Flagstaff’s busy real estate season, and what an exciting selling season it has been so far! There have been many interesting changes in the Flagstaff real estate market this year, and it seems to be evolving on an almost daily basis. Here are just a few examples: interest rates have continued marching forward. Higher interest rates affect a buyer’s purchasing power. Inflation and even gasoline prices have an impact on real estate prices as well. And then there is the whole supply and demand discussion – is inventory tight or plentiful? – this will also impact pricing.
The examples above are not limited to Arizona or even the entire country, but are being experienced in all cities worldwide. The dollar is strong against foreign currencies, gold has dropped in price because the U.S. dollar is so strong, and interest rates are up across the globe. These variables suggest one thing: that it is certainly hard to know how the economy and real estate prices will shake out across the near- and long-term future.
Have you been sitting on the sidelines waiting for something to happen before you make the decision to purchase or sell real estate? Are you possibly waiting to see what will happen with the world’s economies, gold prices, inflation, interest rates and the stock market? It’s hard to time the market perfectly when there are so many factors at play.
The best way to gain a market understanding is to develop a relationship with a real estate expert. We deal in facts (not today’s headlines), not emotions, and facts are the best variables to consider when making your real estate decisions!
Here are some thoughts:
The Buy Side
Despite what you may be hearing, I am primarily bullish on the Flagstaff real estate market. With rising inventories and longer average time-on-market, this may be a great time to dip your toes into purchasing. Whether it is your first home or you are adding to your growing real estate investment portfolio, this is a good time to get into the market.
Owning vs. Renting
There is no better feeling than home ownership. It is, after all, the American Dream. So if you are weighing a purchase against continuing to rent, think again. Rents are not going down. Landlords do not generally reduce rents. And with record-setting inflation standing right in front of us, the best guess suggests rent prices are going up. That’s the beauty of real estate. You lock down a long-term loan and your monthly housing budget remains constant. If you own your home, there is no landlord moving your monthly housing costs up year after year. Financially speaking, saving the money that you are throwing away to your landlord and putting that toward the actual equity of your own home through mortgage payments will save you tons down the road, not to mention the appreciation in value you will witness over the years to come. Additionally, making improvements to the home or landscaping will only increase your home equity.
In recent months we have seen interest rates increase from 3% to today’s 5% or 6%. Note: In past articles, I have addressed the issue that higher interest rates reduce real estate purchasing power. But if you look at today’s interest rates from a historical 50-year perspective, you will see that current rates are still at historically lower levels. Time will only tell what happens with rates, but today’s rate may not be a bad thing to lock down. I recommend you speak with your local Flagstaff lender about interest rates and the various types of loan options. Or think of it this way: Marry the house, and date the rate.
Inventory in the last few months has been steadily increasing. This has given local buyers more to choose from and a bit more time to make the decision. An increase in inventory benefits the buyer because it provides more negotiating power – more negotiating than in previous months, where it was difficult to compete with multiple offers.
This is a hot topic these days. As we see inflation rise, the cost of almost everything, real estate included, just keeps going up. If you are able to lock in a rate with a fixed-rate mortgage, then essentially the cost of your home (which is an appreciating asset) will stay the same, while the value of your property increases. Let me repeat: by owning a home, your monthly housing cost remains constant even as your asset appreciates in value! That’s why investing in real estate can be one of the safest investments you make during periods of high inflation.
The Sell Side
It is safe to say that Flagstaff’s home values peaked in February of this year. Since then, we have been witnessing a “shift,” as many of my colleagues have coined it. Increasing interest rates, a trepidatious stock market and inflation have put many buyers on pause. With that said, a year-over-year analysis is quite revealing. The median year-over-year sale price is up 14.8% (24% year to date). And as one might expect with rising prices, the number of sold listings year-to-date are down 16.4%.
What is Selling?
We are seeing homes that are “turn-key” with little up-front maintenance outperforming other homes on the market. Buyers realize that in Flagstaff it can be hard to source certain trades, and the cost of those specific trades have increased significantly. Therefore, if a buyer is able to secure a home with little to do in terms of remodel, they are more willing to pursue that home. Talk with your real estate professional to discuss what is needed to be done to your home in order to present it to the general public in its best light.
Tips and Tricks
If you currently have your home on the market, maybe it is time to get a little creative with how you structure a deal. As an example, imagine a scenario where the buyer is struggling to pull the trigger because of high interest rates. Get creative! Instead of reducing your sales price, present the idea of assisting the buyer in “buying down” the interest rate. Essentially, you would be offering the buyer a “seller credit” that can be used to buy down the buyer’s interest rate. It is a win-win for everyone! With a trusted real estate advisor on your side, there are many ideas and scenarios like this that could be realized in your transaction.
Today’s bottom line is this: Home prices are still holding on to the tremendous gains made over the past two years. Furthermore, if you purchased “a” home because you could not compete with other offers for “the” home, well now may be the right time to go and purchase “the” home you have been waiting for. After all, you deserve it!
Happy buying and selling, Flagstaff! FBN
By Blake Cain
Blake Cain is a local Realtor with Russ Lyon Sotheby’s International Realty. He can be reached at 928-856-9071 or blakecain.com.