Arrowhead Lakes: 2010 Preview - Happy New Year

The year of 2009 has come to a close and the New Year is upon us. 'Hope springs eternal' is an expression that never rings truer as we enter 2010. You would imagine that the last couple of years would have restricted on one's ability to stay positive. However, I have to say that most of the people that I come across each day are decidedly more optimistic than pessimistic. Not that we ignoring the very real challenges in every aspect of the economy.

Currency markets, stock markets, commodity markets and yes, housing markets have been extremely tumultuous for the last couple of years. When I look at the housing market in the greater phoenix area, I see several factors that lead me to believe that stabilization and recovery are underway.

Levels of Inventory

First, our inventory levels have come down to very good levels through 2009. At the time of this article, there are only 18 homes on the market.  There are another 14 homes under contract. Since the first of the year, 47 homes have sold. That is just over 4 closing sales per month or in other words, we currently have just over 4 months of inventory available. In real estate terms, 4 months of inventory is pretty healthy for sellers.

Prices of Homes

It should not come to anyone's surprise that prices are much lower than they once were. The average price per square foot for the year was $142.64 and ranged from $95.80 to $189.95. This lower level of prices has led to the higher demand in home purchasing.  Today, many builders, investors and other industry insiders tend to agree that the cost of building a home would be higher than purchasing an existing home in many cases.  I bring that point up for one main reason: we may be in an over correction in some cases.

Over Correction?

The term over correction should not be something that we should apply to the entire market. However, in some cases, where a home could be purchased for much less than the competition and much less than building the same house, one could believe that home is a pretty good value. I have always looked at the cost of replacement as a comparison to resale values.

Buyer Preview

Arrowhead Lakes has become one of the most sought after communities in the Valley. With close proximity to highways, entertainment, shopping, and dining Arrowhead Lakes fits many of the search criteria for today's home buyer. The fact that we have the Lakes, many people find our community as a unique consideration when looking for a home.  With inventory levels lower than last year, buyers should expect to compete for the best home values.  One may argue that with a 4 month inventory, a buyer could take their time. This is true to a point. There are homes that come to market that are considerably better in value than others. When this happens, buyers should move quickly. One more important factor for buyers to consider is the very low rate of interest for mortgages today. This allows for much greater purchase power than when higher rates exist. In fact, if you are buying at 5% versus 7.5% and want to keep your principle and interest payment at $2000 per month, you could borrow $374,000 at 5% or you could borrow $286,000 at 7.5%. I am not saying that rates are going to go higher anytime soon; however, the risk of waiting seems to be a real issue.

Seller Preview

Sellers should be prepared for sales to be similar to the past year. It is my opinion that we will see prices pretty stable over the next year. There are macroeconomic forces that may increase or decrease the demand in the overall economy.  The homebuyer tax credit extension and amendment will have some impact on the level of sales.

I have to say that when looking at the housing market in our area, people have reason to feel good about going forward.  The Kuttner Team at RE/MAX Professionals believes that 2010 is going to be a great year for the area. We want to thank those we have worked with over the last year. We also look forward with anticipation to the new relationships we will make in the year ahead.