Where is the Real Estate Market Trending or Heading? 

Ok.. were back. Values are sky rocketing and prices are increasing at a trend rate that is almost straight up!
The (I’m going to get technical here with math) slope of the trend graph for some of the major metro area like Tampa, Los Angles, San Diego and Phoenix is very large number. This growth straight up! Get ready, for lotteries, lines and no homes. Of course you must have been sleeping if you are in the industry have not seen this yet.

To look forward, we must look at where we were in the past. See the following graph.  (For a high resolution PDF version click here.)

It appears from the graph of Phoenix House Values below, that the real estate market in the Phoenix area is heading up.   Is it time to buy real estate again?  How long will it take to come back to normal?  Should I get out of the market and wait?  These are hard questions to answer but here are Sandy Cramer’s predictions and recommendations:

ü  Home values will not return to the trend line for another 1-2 years. Latest trend shows Phoenix back to the highs starting July 2015!

ü  The upturn in values are due to LACK OF INVENTORY AND RECORD LOW INTEREST RATES.

ü  Keep your home if possible.  Do whatever it takes to keep the current home.

ü  Do a Mortgage modification?  Its possible but there are very few who are successful.

ü  If you ‘bail out’ and let the bank foreclose, you will not be able to purchase a home for 5-7 years, maybe even never again!

ü  Inflation will come back and the value of the dollar will drop dramatically.  (This could change if the USA will cut spending and raise taxes, cut medical/social security, and increase the tax rate by 45%. I don’t think this will happen.)

ü  The amount of debt in the USA will continue to grow.

ü  In 5-7 years, it will cost $10 to buy a loaf of bread.  Gasoline will cost $25/gallon. And the average starter home price will be $600,000.

ü  Get out of debt; get rid of the credit cards and pay them off.  Purchase only if you have the cash.  Do not get into any debt.  (I sound like your mother here, but she was correct.)

ü  Start a side business.  It’s too difficult to explain here why, but the best reason is the potential tax advantage and the possible income.  Your own side business is the LAST area the government has yet to attack.  Make it simple and get going.  An extra $400 per month really helps.

ü  If you are able, purchase quality single family homes in a good area and turn them into rental units. (Your side business?)

I’ve talked to a lot of people who feel that they can ‘let their home go and rent for awhile’.  Rental rates are lower than their mortgage rates. Yes, they are!  ‘We can save a lot of money by renting vs. paying the mortgage, and in 2 years we can purchase again and have a good down payment.’  Well, it’s actually going to be 5-7 years before your credit report looks good to purchase a home again.  And can you really save the money?  Most people will spend the money on toys.  If hyper inflation hits, like some economist predict, then you’ll be priced out of the market. Do you want to take the chance?  Keep your home, do a HARP 2 Mortgage modification, and hang on – the next 5-7 years are going to be enjoyable.

For more information contact me at Sandy@bigdaddydennis.com.

About the graph.  Data is provided by S&P,  unfortunately the compilation takes a few weeks to complete – so the graph is always two months behind today.  Data comes out the 4 Tuesday every month and is two months behind.

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Apple Wood Fund

23335 N 18th Drive Suite 120

Phoenix AZ 85251

Updated 5/30/2013