Flagstaff Real Estate: Is it a Hedge Against Inflation?
If you’re lucky enough to have a home in Flagstaff, good for you!
Welcome to our phenomenal seller’s market for Flagstaff real estate 2022. Our 2021 home sales prices are forecast to exceed and even the most seasoned real estate agents are surprised by our rapid sales. Properties listed in the $600,000 to $900,000 range will receive 18 to 20 offers within days of being posted to the MLS. The number of buyers in Flagstaff far outstrips the number of properties for sale.
Although sales prices for Phoenix real estate have risen 27% since this time last year and Flagstaff has kept pace at 26%, there are still opportunities for investors. Yes, Flagstaff home selling prices are at an all-time high, but they’ve also been at an “all-time high” every year since the third quarter of 2018. Living in Arizona is fueled by migration to the Southwest for job opportunities, our comparatively attractive property and sales tax base, weather, and lifestyle. Rental fees are also rising and are hard to come by as buyers with jobs in Flagstaff wait for trustees or try again to make an offer acceptable to sellers.
If you’re lucky enough to have a home in Flagstaff, good for you! You may have checked with your real estate agent or on the many websites how much your property has increased in value/equity even if you bought it three months ago. Have you considered investing in Flagstaff real estate alongside your primary residence? While it would have been more advantageous to buy property in 2011, when the market was stagnant after our infamous liar credit “bubble”, but as we all know, we cannot go back in time!
What options are there for your investment funds today? Stocks, ETFs, Mutual Funds, Net Funds – inside or outside of your IRA or 401K. Watching what could be the end of our long “bull market” may be unsettling for many investors, but the long-term rate per financial advisor is a conservative 3% to 5% per year. Stashing funds in ultra-low interest bank accounts, CDs and other fixed instruments, like under your mattress, may seem like the safest place, but in today’s economy, is it the wisest choice?
Now that our inflation rates have gone from 2% to 4% and now 7%, do you have a plan for how your wealth can keep pace with rising inflation? Buying Flagstaff real estate now can have some advantages. First, retail prices are rising and forecasters are predicting this trend will continue at least until 2025. Second, if you need financing to buy your investment property, Flagstaff’s Chris Hallows with Wallick and Volk Mortgage says, “Most people are risk averse, but mortgage interest rates are still at historically low levels, even with the upside moves that are projected.” Third, if you pay cash for your investment property and the forecasters get it right, hopefully you can earn a rate higher than your average stock market portfolio and get the added benefit of top rental income while enjoying it, to observe the increasing equity of your property over the next few years. And fourth, consider your tax implications of depreciation for repairs and expenses, property taxes and mortgage fees, and depreciation schedules over the years.
Another option may be to use your existing IRA or 401K to fund your Flagstaff real estate investment. As with any plan, work with professionals you trust. Your real estate agent can help you develop a plan to accept your offer to buy in this highly competitive market and educate you on how the market has changed for both buyers and sellers. Speak to your tax and financial advisor to explore the pros and cons of all your investment options and determine which options work best for you. Once you have charted your course, be bold and don’t look back! FBN
By Paula Mack
Paula Mack, SRES, is a REALTOR at Russ Lyon Sotheby’s International Realty. She can be reached at 928-699-6837 or [email protected].