It is nearly impossible to predict the long term direction of any market but with you knowledge of macroeconomics you can make an educated guess regarding the best time to buy or sell. I provide the below information to my clients to help them make an educated guess regarding when to buy and sell:
Vital Sign Indicator #1 : Interest rates.
Interest rates act on property values the same way gravity acts on physical objects. The higher the rate, the greater the downward pull. In other words, rising interest rates have a depressing effect on real estate prices . . . while falling rates tend to raise prices.
Vital Sign Indicator #2 : Home sales.
Home buyers are a dominant force that drive real estate prices higher . . . and lower. It's simple supply and demand. When the number of buyers are increasing, more homes sell . . . and prices go up. When buyers are more scarce, less homes sell . . . and prices tend to go lower.
Vital Sign Indicator #3 : New home building permits .
New home builders respond to the market place according to demand. When demand is strong, they "pull" more building permits so they can build ~ and sell ~ more homes. When demand is weak, they pull fewer building permits so they won't be stuck with a lot of unsold homes in a softening real estate market.
Vital Sign Indicator #4 : Loan Defaults
Homeowners who default on their mortgage loans are generally having money troubles. This is a sign of a weakening economy . . . which soon translates into a weakening real estate market. When homeowners are defaulting less on their mortgage loans this is a sign of an improving economy and real estate market.
Vital Sign Indicator #5 : Foreclosure Sales
Property owners who default on their mortgage loans â€“ allowing their homes to be sold at a foreclosure sale â€“ are generally having severe money troubles. Like loan defaults, therefore, the number of foreclosure sales is a clear measure of the health of the economy. This determines whether real estate prices are likely to rise ~ or fall.
Interest rates are at an all time low, more and more buyers are entering the market, the supply of homes are decreasing, builders are starting to build more houses, loan defaults are decreasing and foreclosure sales are doing down. Therefore, the Phoenix residential market will continue to see appreciation unless any number of these vital signs change quickly.
If you have any additional questions regarding real estate investments, then please feel free to give me a call.
Sean Heideman, Broker
Office: (480) 213-5251