The answer is, frankly, YES. It’s easy to be confused by all the mixed messaging that comes out of today’s news. This is why you never want to underestimate the need for an expert advisor to help you sort through details. Housing Starts and Existing Home Sales Reports are major financial indicators and have substantial importance to all financial markets. Understanding how the national housing market and Arizona housing market affect our Flagstaff housing market can save you thousands of dollars when it comes to buying or selling today.
Today’s prices compared to the 2005-2007 peak are up 15-20 percent in Arizona. In housing, 2012 is known as the year of recovery, 2013 is now the year of stabilization and 2014 is predicted as the year of growth. Housing inventory is down, distressed home sales are down and interest rates are still low but moving upward. The tapering of asset purchases by the Fed is expected to be completed by the end of 2014, say industry experts. Bill McBride of Calculated Risk says, “It appears they will only slow the taper if inflation declines sharply – or if the economy stalls; I think both are unlikely.”
Here are a few historical time periods where home prices and dramatic interest rates co-existed:
- May 1983, low interest rate 12.63 percent – July 1984 high interest rate 14.67 percent
Home values increased 6.6 percent
- March 1987, low interest rate 9.04 percent – October 1987 high interest rate 11.26 percent
Home values increased 5.2 percent
- October 1993, low interest rate 6.83 percent – December 1994 high interest rate 9.20 percent
Home values increased 1.2 percent
- April 1999, low interest rate 6.92 percent – May 2000 high interest rate 8.52 percent
Home values increased 10.9 percent
Back to answering the initial question: it depends on the price range. The ruling ratio is absorption rates of less than five months of existing supply in a specified price range; that is what is classified as a seller’s market. In Flagstaff, the strongest buyer’s completion is in the under-$299,000 range, where multiple offers are seen on homes. Buyers in this range need to come in strong with, and understand, the most effective strategy to win the offer.
In contrast, the absorption rate for homes over $1.4 million is 72 months. Recognizing this, I have one of the two current pending sales in this price range. I mention this because I believe there is always a buyer for the right home. Don’t be discouraged in the higher price ranges, as there are buyers if your home is presented correctly.
Buying and selling today is much more than an evaluation of whether or not it’s a buyer’s or seller’s market. You are paying for housing whether you own or rent, and keep in mind that housing is the one leveraged investment available. If you are considering selling to move up to a bigger home, selling now can still save you money – even if you make less on your home today – because of the compound effect on future home price and interest rate increases.
Take time to find the right expert advisor who can help make sense of these expected changes. When the housing market improves, new real estate licensees come to the market and 80 percent of new agents leave the business in the first year. Explore your options and find a professional that makes sense for you. FBN
By Georgina Dalton, PLLC