There’s no doubt 2020 has been a very challenging year in Arizona. A global pandemic coupled with an economic recession has caused headaches for many people in AZ. However, it has also prompted more people in Arizona to reconsider the meaning of “home.” This quest for a house better designed to fulfill our current needs, along with record-low mortgage rates, has skyrocketed the demand for home purchases.
This increase in home buying demand, on top of the severe shortage of homes for sale, has also caused more home purchase bidding wars and thus has home prices appreciating dramatically. Some, home owners therefore, have become cautious about selling and buying a home right now.
Looking at the cost of owning a home, even though homes have appreciated by a whopping 6.7% over the last twelve months, the cost to buy a home has actually dropped. This is mainly due to mortgage rates falling by a full percentage point.
Let’s take a look at the chart, a monthly mortgage payment on a $300,000 house one year ago, and then compare it with that same home today, after it has appreciated by 6.7% to $320,100:
Compared to this time last year, financial experts say that you’ll actually save $87 dollars a month by purchasing that home today, which equates to over one thousand dollars a year. There is still a lot of homeowners with variable rate mortgages that can also take advantage of locking a fixed rate in. Less risk of payments going up with possible rate increases.
But isn’t the Arizona economy still in a recession?
Yes, it is. That, however, may make it the perfect time to buy your first home in Arizona or move up to a larger one. Tom Gil, a Harvard trained negotiator and real estate investor, recently explained:
“When volatile assets are facing recessions, hard assets, such as gold and real estate, thrive. Historically speaking, residential real estate has done better compared to other markets during and after recessions.”
That thought is substantiated by the fact that homeowners in AZ have 40 times the net worth of AZ renters. Odeta Kushi, Deputy Chief Economist for First American Financial Corporation, recently said:
“Despite the risk of volatility in the housing market, numerous studies have demonstrated that homeownership leads to greater wealth accumulation when compared with renting. Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments, which become a form of forced savings for homeowners.”
With home prices still increasing and mortgage rates perhaps poised to begin rising as well, buying your first home, or moving up to a home that better fits your current needs, likely makes a ton of sense.