Tucson Real Estate, Time To Buy?
Tucson Real Estate, Time To Buy?
Tucson Real Estate, Time To Buy?
If you are a Tucson Realtor, is your sales technique to convince potential buyers that it is a good time to buy, because prices of Real Estate in Tucson have dropped so much, and houses are a good deal because they are cheap.
How cheap are they? Words that you use in your Sales Presentation like : Cheap, Good Deal, Reduced Price, Foreclosure,Bank Owned, etc. may be doing nothing more than reinforcing the negative aspects of today's Tucson Real Estate Market with what your customers hears in the media. If you would have been able to tell your customers in 2007, that you had house's that you wanted to sell them that were 50% off the price, you would have been buying ink for your Contract Writing Pen by the Gallon. The reason is, the market was booming and it would have been an actual savings to them relative to the market. No matter what product you sell, you will always have more success selling a benefit or value to your clients.
What is the benefit or value today? To answer that question, you have to quantify what the real value of a property today is versus the past and future.It would be natural for some Tucson Realtors to try to show value by comparing today's price to three years ago. Unfortunately, they are unrelated. As a customer buying a house, it might put some doubt in my head. I sure wouldn't want to lose 40% of the value over the next three years. Obviously, with the current inventory and more foreclosures coming down the pipe, the pressure for prices to drop is greater than than pressure for prices to rise. That doesn't mean buying a house today is a bad financial choice, in fact, it is a great time to buy.
The reason's why it is a great time to buy are many. First of all, as a buyer, you have a great selection of houses to choose from. This applies whether you are looking for a fixer upper or a Multimillion Dollar Estate. The market has stabilized. The likelihood of houses dropping more than another ten percent is slim to none [ Cost to Build vs. Buy Existing]. Interest Rates are still at all time lows. Best execution today on a 30 Year Tucson Mortgage is 4.5%. Compared with the Average Tucson Mortgage Rate over the last ten years, which is around 6.5%, a client buying a 150K house would save over 60k in interest. Just like the pressure for Real Estate going down is increased, the pressure for rates to go up is increased. If someone is waiting to buy because they think home prices are going to go down even more, rates are sure to erase any additional savings they might realize. Real Estate has been pummeled so hard the last few year's, it is the only real asset you can buy today that is actually selling for a discount.
Let's say that our Government has borrowed 1 Trillion Dollars from Foreign Entities over the last few years. Regardless of our economy, we still have to pay it back. If we pay it back at the Exchange Rate at the time we borrowed it, we would pay them back 1 Trillion Dollars plus interest. If we could some how weaken or devalue our Dollar against their currency, we would pay back less than 1 Trillion Dollars. So the more we can make our currency worth less in relationship to theirs, the less we actually have to pay back. China has been doing this for years. There are a few disadvantages to doing this. One is inflation. Inflation is basically a term for "My dollar buys less today than it did yesterday". This has an absolute effect on the cost of Imported Goods, making them more expensive.It also creates a bargain atmosphere for other countries whose currency has gotten stronger against the dollar, so they buy more things from us( Our Exports).If you owe money, Inflation is a Debtors best friend. Inflation also has another effect. In simple terms, it makes prices go up. Especially things like Energy, Oil, and REAL ESTATE. This is the reason Real Estate has always been a hedge against inflation.
So here is the perfect storm brewing:
1. The population of the United States usually grows between 2 Million and 3 Million people per year, or about an extra 1 million new households. These people need somewhere to live. Renting has become progressively expensive as the families who got foreclosed on are now Renters, ( Supply vs Demand), making buying more affordable.
2. As of this month, the total months supply of Housing Inventory is a little over seven months, and has been declining quite significantly.
3. Sales have steadily increased over the last Year.
4. The Millions of people who got foreclosed upon, or did a short sale, are now coming back into the market, and able to qualify for a mortgage.
5. Inflation makes prices go up, and is always accompanied by Higher Wages ( Inflation increases The Cost of Living).
6. Inflation also has a direct effect on Interest Rates. They go up. The Government wants rates to go up for several reasons. They aren't going to keep them artificially low very much longer. There is no need. Waiting six months could be a night and day difference in the cost of your home. One thing for sure, they aren't under any pressure to go down any further.
7. Demand can exceed supply quickly, and no one will know until about three to 6 months after it has happened. So trying to time the market is near impossible. Being able to get a snapshot of the current market is impossible due to the fact that Real Estate Sales are Regional, Seasonal, and actual Sold Statistics have a 90 to 120 day lag time.
8.Mortgage interest deduction compared to Paying Rent. No Comparison.
9. Unemployment is declining, or at least stabilized.
10. The Economy is growing, instead of shrinking.
11.Real Estate is a Long Term Investment with Short Term Problems. This is not the first Real Estate Crisis, and certainly won't be the last. Look at any Real Estate Statistics Chart. This happens every 7 to 10 years, like clock work. Real Estate runs on cycles. Real Estate is not unique to these cycles. Case in point; The Tech Bubble, Stock Market Collapse(s), Savings and Loan Collapse, just to name a few. If you are old enough to remember an event similar to this, it happened in the 1980s. The difference is rates today are at 4.5%. Back then they were 18%. Try staying positive in that environment. Fact is, they all recovered and it didn't take decades. One thing every crisis has in common is everyone always says "It's been bad in the past, but it's never been like this before" Sound familiar?
13. The worst economic lows our Country has experienced in my lifetime, was October of 2007. The Dow Jones Industrials had dropped to around 6200, down from 14000 a year earlier. It was a sign of total collapse. Our Industrial Goliath was Hemorrhaging Dollars with no BandAids in sight.The country was Bankrupt, Broken and The New Depression was going to last for decades. All of our elderly citizens had lost more than half of their Retirement Savings. What would they do? Here we are two years later. Dow Jones has increased so much it has almost doubled since that day. Keep in mind, some of this is do to the Weakening Dollar, but also, investors confidence in a more productive future.
14. New Houses are not being built at a pace to meet demands of the increase in population, compared to Death Rates. Sure there are still more foreclosures coming, but Lenders are Foreclosing houses and remarketing them according to demand, so they don't completely flood the market and drive prices down even further ( Ever wonder why people can stay in their homes for so long without making payments ?). Bank Reo's are going to be a major supplier of houses for probably the next two or three years, but their position of being a Primary Supplier will be diluted as each day passes.
15. Follow the big money. Warren Buffet( Berkshire Hathaway), probably the most successful investor of all time, predicts Residential Real Estate to recover this year. Another indicator: Commercial Real Estate is booming. Research the top 15 or so REITS, and you will see they have returns of over 22% in the last three months after a very good 2010. If Commercial Properties are being rented, that means more businesses opening and more jobs( and yes, I do know they are more diversified than just Strip Malls).
16. National Association of Realtors forecast Existing Home Sales to rise 7.9% and New Home Sales expected to rise 17.7%.
17. Whatever you watch on the main stream media, believe the opposite. Next time you watch the news, count how many stories are positive. Misery, death,destruction, and anything that they can say to tap into your emotions sell. Good positive news doesn't.
Here is to a positive, successful year for everybody. Good Luck!
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