Increased Demand But Prices Remain Unchanged From A Year Ago

Interestingly, despite the flurry of home sales we’ve had in Flagstaff this year, the trailing average price is about the same now as it was a year ago. We saw prices bump up a little bit this summer, but those increases seem to have faded over the past couple months.

One would think that with demand being up and supply being down, prices would continue to rise. However, the balance of supply and demand has just barely reached a normal level. In other words, there are just enough sellers and buyers to keep the prices steady; there’s not enough of an under-supply to dramatically increase the prices. One explanation could be that the demand exists only because of the lower prices and that as buyers face the prospect of paying more for a home, some just change their mind about buying.

Fortunately for those Flagstaff buyers who stay in the market, the combination of exceptional prices and historically low interest rates make this an incredible buying opportunity. And for those needing to sell, the balanced market has made the conditions for selling better than they have been in years.

Could You Be A Real Estate Investor?

Many people may have a misperception about the typical real estate investor. They often think you have to be very wealthy to invest in real estate. Fortunately, that’s just not the case. It turns out that many real estate investors are your average, everyday people. It may be your neighbor who owns one or two rental properties or a friend who moved into a new home and kept their old one as a rental. And, in reality, it could very easily be you if you wanted.

Real estate investors are just those who have chosen to utilize real estate as a way to diversify their investments and build wealth.

The most common reasons my clients invest in real estate are to diversify investments, save for their kid’s college education, and to create wealth for retirement. Think about this: wouldn’t it be great to have renters pay off your mortgage for the next 15-30 years and then have a cash producing asset that you now own free and clear, just in time for retirement? Then at that point, you still have the rent payments coming in but without the mortgage!

Still not sure if you could fit the profile of a real estate investor? Consider that the median household income of those who purchased investment property in 2011 was $86,100, which doesn’t compare that much differently than the median household income of those who bought primary residences – $72,400. Plus, the median age of investors last year was 50, with half of investors under the age of 45.

Here are some other interesting facts about investors:

  • A large portion of investors purchased in their own community – 38% of investors bought within 15 miles. However, it’s fairly common for investors to buy in other areas – 30% of investment purchases are over 100 miles away from the investor’s primary residence.
  • 27% of all residential real estate purchases in 2011 were investment property, up from 17% in 2010.
  • Almost half of investment properties were purchased with a mortgage. So, yes, there is financing available for investment property.
  • The median length of time an investor expects to hold onto a property is five years, but a significant percentage plan to hold on even longer than that.

Keep in mind that most people’s attitudes on investing are different now than at the peak of the market. Most investors are now looking for longer term opportunities that bring in a positive cash flow.

Another interesting tidbit is that 78% of investors surveyed believe that now is a good time to purchase real estate. This, of course, explains why so many of them are doing so!

Think Flagstaff is too small for investment opportunities? You’ll find it interesting that 37% of investment property purchases were in small towns or rural areas. Plus, having a steady flow of students from NAU contributes to the strong rental market in Flagstaff.

There are good investment opportunities in this market and now may be a good time to learn about diversifying your investments with real estate.

All statistics are from the Investment and Vacation Home Buyers Survey 2012, ©2012 NATIONAL ASSOCIATION OF REALTORS®. All rights reserved.