Is 2008 the Year You Will Wish You Had Purchased Your Flagstaff Home?

If you are thinking of ever buying a home in Flagstaff, this is the year to do it, in my humble opinion. For the last many months, we’ve seen economic news that tends to keep real estate buyers on the sidelines. We’ve seen gyrations in the stock and bond markets, the value of the dollar falling, oil and food prices soaring, and we’ve seen the Federal Reserve continue to try to chase the economy downhill by cutting rates and creating inflation fears in the process. Since the first of January, we’ve seen rates on 30-year fixed rate home loans fall as low as 5.25% and rise as high as 6.25% and now fluctuate in the middle with apparently unpredictable volatility. All of this news has a tendency to keep real estate buyers sitting on the sidelines, hoping they will catch the market at its “bottom” and worried about the future.

Here is the trick: In the same way that no one knew when we had hit the top in prices, we’ll not know when we hit the bottom. No one can know exactly when it will happen or what will cause the turn around. When it does, the motivation and flexibility that sellers are now affording buyers will be gone and those still sitting on the sidelines will kick themselves for missing the “bottom” of the market. So, while there is still some flexibility for buyers of Flagstaff real estate, it’s good to reflect on the benefits of owning real estate aside from appreciation (and, in the long-term, that will be a benefit again also). The primary benefits in addition to appreciation are cash flow (for investors) and equity build-up and tax benefits (for all owners of real estate).  Consider this: rental demand is stronger than ever. Flagstaff rents continue to be high and vacancies are shrinking as fewer people qualify for mortgage loans and must continue to rent. All of this means it makes sense to buy now if you ever intend to buy in Flagstaff.

Homes that have sold in Flagstaff this year have generally sold in 2-3 months from their listing date. There are many homes on the market that are not selling. Homes that are priced right and presented well are still selling. That said, sales in March were significantly lower than in January and February and inventory ratios began to build as more homes were listed in anticipation (perhaps false anticipation) of a “better” market in the spring. My own view is that the market we have seen for the last year is the market we will see for the next year – the volume of sales and prices are likely to be the same or slightly lower in 2008 than in 2007. But at some point, whether in late 2008, or beginning in 2009, the trend will reverse. Meanwhile, home loan rates right now are quite low. We have most likely seen the lowest they will be as inflation fears continue to mount. Thus, delaying a purchase in hope of getting a slightly lower purchase price may cost a buyer in interest costs so much that waiting was not worthwhile, especially because of the postponement of tax benefits achieved through homeownership.

All investments carry some level of risk, and purchasing real estate is certainly no exception. This is not the time to make decisions that have not been carefully analyzed. What is a good purchase for an investor may not be a good purchase for a typical homebuyer.

For advice on buying or selling that is tailored to your special financial needs, give us a call. Team Heitland at RE/MAX Peak Properties is here to help you and your friends through the turbulence of the real estate market.