Some of you may have read recently that the fed cut the prime rate and it looks to be a win-win for the mortgage rates remaining unaffected after FOMC (Federal Open Market Committee) meetings this week. The fed funds rate was trimmed by 25 bps to 4.50% and the discount rate by the same amount to 5.0%. They anticipate this will help shield the broader economy from adverse effects of the housing downturn and help with goals of moderate growth and price stability over the long term.

 

I recently spent some time with Mike Hornacek from Professional Financial Services of Arizona and asked him what he thought about the market conditions in the Phoenix Metro area and this is what he had to say. “Current market conditions and the press are all screaming PANIC - DO NOT BUY! However, this is exactly the time to buy - why?  Because a couple of years ago, everyone was yelling BUY! BUY! BUY! But during this time, the smart money investors pulled back because the mainstream population was caught up in a whirlpool of press reports again. Too many buyers ventured out to purchase without the proper counsel of an experienced Realtor thinking that purchasing real estate was like going to Costco to get the latest yard gadget before they were all bought up.”

 

Mike continues, “Historically, mortgage rates have never stayed this low for so long. The market changes daily and even hourly but this has been an awesome run of cheap money despite the current oversaturated market. If you hear the news about our dollar softening, eventually so will other countries that hold our bonds as investments. The fear will spread and will result in “dump and sell” back to the US. This strains the oversupply scenario even more and could cause mortgage rates to eventually climb. So when is really the time to buy?  Answer: Right now. Interest rates are still affordable and the home choices are generous.”

 

Although at the beginning of the year, there was little hope for a first time buyer looking to buy anything within a 100 mile radius of Maricopa County. That has changed over the last 11 months. The market has adjusted itself in favor of great affordability as it always does in the 7-10 year cycles. Additionally, the gap between list price and final sales price is shrinking. In September, it was reported that the median list price was $265,906 and sales price was $234,900. That is only a spread of $31,000, which back in February of this year, the spread was as high as $50,000. The shrinking spread is a positive sign that consumers are regaining their confidence in the market and we may start to see improvement in the number of homes being sold. Home prices have finally reached an affordable point. For example, in Surprise, you will find single family homes listed as low as $140,000. There are amazing deals happening in the market today that were not options for buyers 24 months ago. As Mike said, the time is now to buy. If you want to talk to Mike more about loan options, please contact him at 623-643-1073 or email at michael.a.hornacek@professionalaz.com.

 

With the changes in the market, there have been an increasing number of REO (real estate owned or in other words, bank owned) properties coming on the market. My team and I recently opened a REO department and we are now working with banks to list and sell these homes. As mentioned earlier by Mike, smart money buys when everyone else is selling and sells when everyone else is buying. If you or someone you know is interested in learning how to make a smart investment in this market, please call myself or any member of my team. We are you real estate experts no matter what kind of market it is! Nate Martinez, RE/MAX Professionals