It’s no secret that Arizona is the place to be in the wintertime. The warm, sunny days coupled with a variety of events around the Valley often entice tourists to call Arizona their home for part of the year. As one of the top “snowbird” states in the nation, when should tourists consider transitioning from renting to becoming a homeowner?
Today’s housing market favors the Arizona homebuyer. In this area, buying a home can be less expensive than renting, interest rates are low and there is little competition when placing a bid. For many that’s enough to consider making a purchase.
The Federal Reserve recently announced the first increase in interest rates in nine years. However, it’s been predicted that there could be little effect on mortgage rates for the time being.
“The Federal Reserve did raise rates; however it only controls the Federal Funds Rate and the Federal Discount Rate, neither of which controls mortgage rates. The changes made on those rates are digested by the market, which can end up affecting the price of mortgage-backed securities, affecting the end rate to a consumer,” said Nick Vallario, branch manager for Evergreen Home Loans. “However, the marketplace is pretty adept at anticipating what the Fed will do and reacts well ahead of any anticipated change. As a result, Fed actions are typically priced into the mortgage market well in advance of the actual announcement.”
It’s unclear whether the market will be in favor of the buyer or seller over the next couple of years. This uncertainty favors homebuyers that are ready to seize the moment and put an offer on the table.
“I’ve seen the Fed lower the Discount rate and in turn the mortgage rates increased. It’s a global marketplace, and while the Fed is the elephant in the room, it remains one element of the market as a whole,” said Vallario. “Mortgage rates are still incredibly low and no time is better than now. Rates won’t stay low forever.”
Vallario adds that even if someone starts thinking about purchasing a home or wants to walk through an open house, the first thing that person should do is talk to a lender and get prequalified and preapproved for a loan. Knowing the qualified loan amount upfront allows a homebuyer to search with confidence.
While interest rates are currently low, rent prices are at sky-high levels. According to Zillow’s 2016 Housing Market Predictions, this year will bring the highest median rents ever. However, the question remains whether the Valley will start to see more “For Sale” signs throughout neighborhoods.
“There is a large boom in apartment construction happening throughout the Valley, which will help keep increases lower, but it remains to be seen if there are enough new housing units coming online at a quick enough pace to keep up with all the demand,” said Chris Salius, vice president of Washington Federal Bank. “Shrinking inventory, especially in the affordable housing price point is keeping that segment of the market selling very fast.”
If the Phoenix housing market grows, then those “For Sale” signs will allow less competition among housing bidders.
Salius adds that another advantage is that the tax code is favorable to homeowners with the ability for many to deduct their mortgage interest and taxes, effectively lowering their overall net housing payment. If you compare this to the projected increased rent prices, then owning a home could be the more affordable option.
