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Is Now the Right Time to Buy?
Apr. 28th, 2008
(Yuma, AZ) While the national media outlets are reporting housing bubbles and price corrections, they often miss the underlying story.
Too often we find the media creates additional questions that are left un-answered. The question that is received fairly regularly is:
Is this still a good time to buy?
The answer is always subject to your time horizon. Are you buying to live in the home for a medium to long range period (3-7 years) or is this a speculative move over the short run.
Over the course of history, Real Estate has earned a 3-5% rate of return depending on the area of the country purchased in. What seems interesting is that when a retail shop puts on a sale, the general media welcomes the paid advertising dollars and the consumers flood to buy goods or services. When the stock market or real estate market corrects, or PUTS ON A SALE, the national media professes doom and gloom and the consumers walk away disgusted they didn’t “get-in” at the top of the market.
Prices of real estate will always be tied to supply and demand. The three factors to consider which will create demand are population growth, inflation and unemployment.
The fact that Arizona is the fastest growing state in the nation in terms of population growth is the key ingredient to the demand question. As more people move into Arizona from other parts of the country, the demand for housing will continue to grow.
Inflation is now at the Fed’s target of just 2% and unemployment in Arizona is running 4.0% as of April of 2008. Both of these factors lead to stability in housing prices. If unemployment specifically were to rise one would see an immediate impact on housing prices as took place in the mid 80’s and again in the early 90’s. Additionally, the Federal Reserve is more open about their concerns for inflation and the target number of 2% thus giving the market additional stability through knowledge and information.
Are we going to see double digit growth annually? NO. Anyone who plans for such returns is planning for failure. However, if a proper long term outlook is viewed one will realize that the population for the United States doubles every 50 years. This built-in increase in demand has a tremendous impact on housing prices. In 2006 the United States surpassed 300 Million people. The median home price in 2006 was just under $200,000. Now if one looks back 50 years with a population of 150 Million people, the median home price was just $24,000. Jump back 50 more years and the population base was only 75 Million people with a median home price of $1,400. What this translates into is that if a real estate purchase is planned now for a medium to long range purchase (3-7 years), now is still a great time to buy and you can even buy while real estate is on sale.
Derek Egeberg is Certified Mortgage Planning Specialist, CMPSR, with over 9 years of residential lending experience. If you have any further questions on this topic or any other, you can contact Derek at [928-314-1008] or email Derek@TheApprovalCoach.com.
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