Flagstaff home prices have fallen since 2006, just like in the rest of the country. The good news is that Flagstaff real estate prices are still, on average, as high as they were at the peak of the market for Flagstaff in 2005. The bad news, for those who want or need to sell their Flagstaff homes now, is that there is a great deal of unsold inventory. Click Here for 3d quarter pricing information for Flagstaff residential real estate. Based on numbers at the beginning of November, there is an 11-month supply of homes as we go into the most difficult selling period of the year for Flagstaff (November and December). Flagstaff townhomes are in better shape, with just 9 months supply, but that is still a tough market for anyone who wants to sell a townhome. (The national average of inventory is 10 months supply for all types of residential units.) In order to sell given this inventory situation, it is necessary to find a way to accept that prices are not going to fulfill expectations of prior recent years. This past week, Jonathan Clements, Wall Street Journal columnist, wrote an insightful article on how to sell your home in this kind of market. The article includes a description of how to use the inventory analysis that I present to all of my seller clients as I advise them on pricing their homes. As shown in the accompanying chart, nationally home prices are down just 4.5% from their July 2006 peak. Yet even as prices appear pretty much unchanged, the number of unsold homes has soared. At the current pace of sales, it would take more than 10 months to clear this backlog. (Longer in Flagstaff, as mentioned above. True, these unsold homes may eventually get bought at decent prices. But in the meantime, the owners are often bleeding money -- and many of them would be smart to slash their asking price and go for the quick sale, according to Clements and economic experts he interviewed for the article. Dump This House: Unloading Your Property in a Slow Market. As Clements says, it would be emotionally draining to have your home on the market for more than 10 months. But it probably wouldn't be a financial disaster – if you don’t have to move and you can comfortably cover the mortgage payment while you wait. However, if you have an adjustable-rate loan that's now unaffordable, or you have moved to take a new job in another part of the country, holding on to that home for 10 months or more could be a huge financial problem. The monthly cost of carrying a vacant home could equal 1% of a home's value, figures Charles Farrell, an adviser with Denver's Northstar Investment Advisors. After all, you still have to pay utilities, insurance, property taxes, maintenance and, of course, the mortgage. (The utilities may be less since you are not living there, but they still have to be home to make the home attractive at showings and to allow prospective buyers the opportunity to inspect all systems as required by the standard Arizona Real Estate Purchase Contract.) What if the mortgage is paid off? There's still an opportunity cost. The equity in your home could instead be invested in, say, bonds yielding 5%. Meanwhile the real estate market in Flagstaff is likely to produce a 0% appreciation over the next 12-18 months. To make matters worse, "prices could be lower a year from now," Mr. Farrell warns in his interview by Clements. "There's also the risk of owning a physical asset. I'm thinking about things like fire, broken pipes, theft."Despite all this, sellers, in Flagstaff and nationally, are loath to cut their asking price, which is the reason prices have barely budged -- so far. “People focus on what their home was worth two years ago, or how much they've sunk into it, or on their desire not to bring a check to the closing," notes financial adviser Bert Whitehead, author of Why Smart People Do Stupid Things With Money. His advice, offered via the Jonathan Clements article: Ditch these emotional hang-ups -- and unload your property now. "If you really want to sell your house, you have to cut deep," Mr. Whitehead says. Here's how to decide for yourself, according to Jonathan Clements: - Ask your real-estate agent how many properties are on the market in your town today and how many sold in each of the past six months, advises Chris Mayer, director of Columbia Business School's Milstein Center for Real Estate. If you price your house like everybody else, it might take 10 months to sell it. (I offer this information as part of my pricing presentation to any Flagstaff home seller who retains Team Heitland at RE/MAX Peak Properties.)
- Suppose you price your home like everybody else and it does indeed take 10 months to sell. Figure out how much you would be out of pocket over that stretch, either because your home is vacant or because the mortgage has become unaffordable.
- Spend time looking at houses in the neighborhood that are your competition. That should give you an indication of what you need to ask if you want to get your home sold now. Price less than the competition. Given the cost of carrying your home and the risk prices will fall further, would it be cheaper to slash your asking price now?
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