In this market, both buyers and sellers need sound advice

Prices in the overall Flagstaff real estate market declined from May to June, continuing the trend that began in April. Unlike the last two months, however, the June decline was not accompanied by an increase in sales. This probably means that more price declines need to come in order to get buyers motivated to commit to contracts to buy Flagstaff homes.

The following chart shows a snapshot of data downloaded July 2 from the Northern Arizona Association of Realtors^® Multiple-Listing-Service for all homes with Flagstaff mailing addresses. There are other homes on the market, and other sales, but the MLS data reflects a substantial part of all the Flagstaff real estate activity.

The chart above is for all Flagstaff homes: single family, townhomes, condos and manufactured homes. The chart below for single-family-homes shows a price increase for that category of Flagstaff homes from May to June, but flat sales and an increase in inventory.

At this rate, if no new homes came on the market for the next 13 months, it would take that long for all the single-family-homes presently for sale in Flagstaff to sell. What Realtors^® call the absorption rate is rising and is already well into “buyers’ market” territory both in the overall Flagstaff real estate market and in the single-family-homes category.

The townhome category showed a marketed jump in absorption rate in June, primarily due to slow sales in that category rather than more units coming onto the market. Flagstaff townhome prices held steady with a median sales price in June of $270,000 – but there were only 10 sales.

Where are we likely to go from here? I expect July to be about the same as June – not as good as May, and perhaps worse than June (if you are a seller). The sellers’ losses are not necessarily a full gain for buyers because mortgage rates are steadily ticking up as inflation fears drive up the risk factor in the mortgage bond market.

Speaking of mortgages, there will be a somber article in the New York Times tomorrow: Mortgage Shares Plummet as Fears Worsen. Bottom line according to the Times analyst: “The worst is yet to come.”  In this risky market, it pays to have advice from a sound mortgage advisor as well as from an excellent Realtor^® and to do some careful planning all around. I’d say this to the Times reporter and the rest of the media spreading doom and gloom about the real estate markets: The stock market isn’t so hot either. Given the choice, if I were “short” on Flagstaff real estate, I’d put my money in a Flagstaff home.

In other real estate news today, PMI Mortgage Insurance Co. released its Summer 2008 U.S. Market Risk Index, which ranks the nation's metropolitan statistical areas (MSAs) according to the likelihood that home prices will be lower in two years. The good news is that Flagstaff ranks a lot better than Phoenix – no surprise. For a summary of the Phoenix data in this report, read Monday’s blog post by The Phoenix Real Estate Guy. Here’s the scoop for Flagstaff: PMI says there is a 34% risk that Flagstaff housing prices will be lower two years from now. That’s not good, but we could be Phoenix. And, it means there is a 65% chance that Flagstaff housing prices will be higher two years from now. I’m not the betting sort, but if I were planning on living in Flagstaff two years from now, I’d buy now and eliminate the risk of higher mortgage rates as well as higher housing prices.