Tucson Real Estate Market Calling Bottom
I get asked all the time if I’m calling bottom in the Tucson real estate market. The usual reply not only by me but others is: “You can only call bottom after it has already happened”
Calling Bottom
Calling bottom is exactly what I’m doing. Why? Because of global inflation and local market conditions.
While most eyes in the United States are focused on Recession and the political scene the rest of the world is experiencing a period of rapidly increasing inflation. The economy in the US specifically the mortgage industry is continuing to be the focus of much attention by the politicians and the Federal Reserve Board. The prime lending rates have been trimmed dramatically in recent weeks to attempt to create a soft landing for a recession.
Make no mistake, we are in a Recession be definition or not. We have been in Recession since 2007. The bell rang loud and clear signaling this Recession in August of 2007 when the mortgage industry meltdown took place and gathered steam all through the fourth quarter of last year.
The financial markets which fueled this unregulated greed factory finally woke up one morning and discovered what some knew all along, “The Emperor Had No Clothes”.
The Bubble Is Not Back
The Bubble isn’t back and hopefully it will never return again, at least not in my lifetime. Bubble not healthy in your veins or in real estate. It doesn’t mean some people don’t make a lot of money during a bubble, some do; however, bubble are not healthy for the market as a whole.
There is still some correction to come in pricing. The sale price of some homes will probably some down even more. But the cost to purchase those homes is rising and it could continue to do so because of inflation.
Lets look at a couple of examples to see bottom has more to it than just asking and sales price.
Buy a color Printer for 21$
Did anybody out there buy a cheap color printer a few years ago? There was a time you could pick up a color ink jet printer for under $30. A lot of people bought them.
Two printer both do almost the same thing, same resolution, same print speed. But one printer is $30 and the other one is $60. Which one is cheaper. Well, the $30 has the lower asking price. But is that what determines the cheapest printer?
The $30 printer requires 4 ink cartridges at $25.00 each.
The $60 printer requires 4 ink cartridges at $10 each.
This was/is a marketing philosophy which runs like this “give away the machine at blow cost to manufacture and make the profit on the consumables.
- Some bought replacement cartridges and complained the price of color copies was too expenesive
- Others that bought the more expensive printer thought the price of color copies was really reasonable and were happy to buy ink and print color as much as they wanted.
- Still others threw away the cheap printer when it ran out of ink and bought a new printer as long as it cost less than the price of replacement cartridges. (Landfills don’t like this very much)
This is not a thing of the past. In December I bought two laser jet printers just like the one we have used for over a year. The cost of a Drum unit for our old printer $89. The price of a new printer $79 so I bought two new printers.
Back in the 80’s my brother-in-law got a really good deal on a house. He financed the purchase of the house with a loan at 18% interest. There is more to the cost of a home than just the purchase price.
We will get back to calling bottom again soon. I leave you with this little comparison chart to ponder.
[where: 85737]
Dave Smith | Tucson Real Estate Market
Dave,
Let’s hope we’ve seen the bottom in Tucson real estate. I think all of us professional agents are ready for the market to pick up soon. Too many buyers have been on the sidelines waiting for the bottom. There is no perfect time to buy. When you need a house, is the perfect time to buy. If you own it long enough, you’re bound to ride out the bumps in the market.
This “Chicken Little” way of thinking should be running out of steam by now. At least that’s what I think!
We will have hit bottom when the mortgage market is not one of the top three stories on the nightly news for a week. Until then we are constantly fed fear. Few have the foresight to see this is the time to buy with interest rates down along with prices. If you are going to live in the home now is a good time to buy. If you expect to speculate want about ten years.