This from my Arizona Republic real estate column (permanent link):
Is now the time to buy a home in Metropolitan Phoenix?
It depends.
If you plan to take advantage of the $8,000 first-time home-buyer tax credit, you need to get moving. If your loan hasn’t closed by November 30th, you won’t get the concession.
If you’re afraid of rising interest rates, you’re probably better off acting now. Mortgage rates cannot stay this low forever. When they go up, they’re likely to go up decisively and for a long time.
On the other hand, if your plan is to pay cash, and if you don’t have to move right away — you might be better off sitting tight. The same goes for all-cash rental home investors.
The mini-boom we’ve seen over the past few months was based in an erroneous belief that the supply of homes in the Phoenix area was limited.
This is untrue. The length and depth of our real estate correction is a consequence of our being overbuilt. There is no shortage of homes for sale, nor any shortage of bargain-priced lender-owned homes. And I think it is silly to bid up the prices of properties that are not in short supply.
The market is already flooded with available housing, and there is a three-year tsunami of short sales and lender-owned homes still to come. If there are enough buyers to absorb that supply of homes, prices may not go down further, or at least not by much. But for bread and butter houses, there is no reason to expect values to go up any time soon.
But there’s more. We are headed into a hyper-inflationary economy — which among other things transfers income from creditors to debtors. The money that you’ve managed to save will lose value over time, while the money you owe will be repaid from a progressively higher income.
The bottom line: Whether you take out a mortgage or pay cash, real estate can be a very strong hedge against inflation. Just by itself, that might be a good reason to buy a home sometime soon.
Further notice: I recorded an extended podcast about the state of the Phoenix real estate market, which you can find by clicking on that link.
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