There's No Air in the Real Estate Bubble

Lately, there has been a lot of talk about the ”real estate bubble” leading to some confusion as to whether now is a good time to buy and sell a home. A “housing bubble” refers to the scenario in which prices have risen above what market conditions can support. Simply stated, the “pop” – which would lead to tumbling prices - comes when there is an oversupply of homes coupled with drastic job losses. The professionals at Coldwell Banker® First Affiliate do not see a bubble on the horizon and remain confident that now is a great time to buy or sell. Here is why:

The National Association of REALTORS® (NAR) predicts that 2005 will be the second best year on record for home sales.
New home sales are forecast to be 1.14 million in 2005, which would make it the second highest year on record.
According to Freddie Mac, the 30-year fixed-rate mortgage rate likely will rise gradually, averaging around six percent in 2005 and 6.3 percent in 2006.

Most housing experts agree that these factors, together with an improving economy and homebuyers outnumbering home sellers in most of the country, indicate that home value appreciation will settle into a sustainable slow, steady growth, and not puncture any perceived bubble. In fact, ever since NAR began recording home prices nationwide in the 1960’s, the national median price for a U.S. home has never declined.

That’s certainly true right here in Yavapai & Coconino counties. Over the past five years, we have seen steady growth in home prices. In 2000, a 3 bedroom/2 bath home sold for $189,757. Today, that same type of home will sell for $420,061, which is an 200+ percent increase. And buyers outnumber sellers. There’s certainly no slowdown in our area!

If you have any questions about “the real estate bubble” and what that concept means to the Verde Valley, stop by Coldwell Banker First Affiliate in Sedona or call (928) 340-6025 and we will be happy to show you exactly why real estate continues to be a powerful investment.

Second Homes are Becoming a Top Priority

According to statistics released in March 2005 by the National Association of REALTORS® (NAR), 2004 was a banner year for sales of second homes. A record 2.82 million second homes were sold last year, an increase of 16.3 percent from 2.42 million in 2003. In fact, investment property and vacation homes account for more than one-third of residential transactions.

The Coldwell Banker® Network offers the following recommendations when considering purchasing a second home:

Location. Location. Location. The most popular settings for second homes are near bodies of water and mountains, in more rural settings than urban. In most cases, second homes are within less than a day's drive from the primary residence. A real estate professional can help identify the best properties in the area you want.
Identify your favorite pastimes. Vacation living equals more leisure time so think about your recreational interests. Second homes near golf courses, ski slopes, boating facilities and biking, hiking or horseback riding treks are always popular.
Know the tax laws. Vacation homes used primarily by the owner are considered personal residences, enabling you to deduct interest on the mortgage and realize other tax benefits. You may also be entitled to tax benefits when if you rent out your second home for a portion of the year. It is important to consult your tax professional to understand the financial aspects of your second home purchase.
Visit the destination. Get comfortable with the community. You will need to get a feel for the traffic peaks and travel time, as well as the area's culture, shopping outlets and other resources. Second homes often wind up as a primary residence upon retirement, so be sure to think about the destination long term.