Fayetteville Arkansas, University of Arkansas--Old Main Overview

Fayetteville Arkansas, University of Arkansas--Old Main Overview
Overview of Fayetteville, AR

Monday, June 19, 2006

Looks Like the Adjustment Period is Here Too

It appears an adjustment period in NWA real estate has begun. Home prices are leveling out. There is a large inventory of homes for sale in the $200,000 and up category. I don’t believe prices will go down, but at the very least, I do not think they will rise as rapidly as they have in the past couple of years.

There are more homes to choose from now and buyers are taking their time looking. Even homes under $150K are staying on the market longer, where last year the good ones would have sold within a week or so.

Mortgage rates have been slowly but steadily rising and that affects home prices and home sales. When interest rates were at their lowest, many buyers who wanted to move up to a bigger, better home did so. Those people are now homeowners, not buyers. And for those who didn't buy, many are now staying in their current homes, since higher interest rates mean that they can purchase less house for the same money now.

What all this means to you depends on whether you are buying, selling, or staying put.

For buyers, it means more choices, perhaps a bit more home or extra amenities than they expected, and more time to make a decision.

For sellers, it means pricing the home realistically, perhaps doing a little extra sprucing up, and being patient.

For those staying put, the adjustment has no short-term effects. Home prices have traditionally increased over time and will no doubt continue to do so in the long term.

In a recent article, Parade Magazine stated “The wild housing boom of the past few years is over.” I would have to agree. The unprecedented, unwarranted increases experienced in some parts of the country are now coming down to more realistic numbers. And the high inventory of homes available in NW Arkansas, as well as higher interest rates, are contributing to an "adjustment" here as well.

Home prices in Northwest Arkansas have also risen significantly in the past few years but in more rational amounts than some of the “hot” markets such as San Francisco, Boston, Las Vegas, and Phoenix, where home prices have skyrocketed in just a few short years. A correction in that type of market is inevitable. It is also occurring here but on a smaller scale.

The thing to remember is that what happens in one part of the country doesn’t necessarily have any correlation to another part. In other words, the current adjustment in the real estate market will have many variations throughout the country. The traditional wisdom is that all real estate is "local" and that is certainly true here in NW Arkansas. Reading national headlines and statistics can cause undue concern. This adjustment period was not unexpected. The real estate market has always experienced swings and the current swing favors buyers.

People have not stopped moving to Northwest Arkansas. Good homes that are fairly priced continue to sell. But since there are more houses on the market, competition among sellers is higher, so the key is to price one's home at market value (or less) if a quick sale is needed. For buyers, there's a lot more to choose from.

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Wednesday, June 14, 2006

Baby Boomers Dominate 2nd Home Market

When I hear the phrase “baby boomers,” a picture forms in my mind’s eye – a picture of large numbers of well-educated people who are nearing retirement age. The number of people born between 1946 and 1964 now comprises the largest generation in U.S. history. They have affected everything from women’s lib and civil rights to glass ceilings and just about everything in between.

I am a baby boomer and a Realtor® so I was not surprised when I recently became aware of some studies by NAR as to the effect baby boomers are having on the housing market, not only nationally but also here in NW Arkansas.

A recent study by National Association of Realtors® (NAR) shows that 80% of baby boomers own their primary residence. The overall rate of home ownership is the United States is only 69%. According to the U.S. Census Bureau, there are 74.6 million owner-occupied homes. That means boomers own almost 60 million of them.

In addition, there are 6.8 million vacation/seasonal/second homes in the U.S. and boomers own 57% of them. Many boomers own more than one. Bella Vista anyone?

Not all boomers plan to make their vacation home their primary residence when they retire, but for those who do, the income tax advantages are very generous. Internal Revenue Service rules state that married homeowners who have lived in their primary residence for at least 2 out of the 5 years ending on the date of sale can exclude up to $500,000 of gain. Unmarried taxpayers can exclude up to $250,000 of gain.

After selling their primary residence, if they then move into their vacation home and make that their primary residence, the same rules apply: live in it for at least 2 out of the 5 years ending on the date of sale and another sizable capital gain can be excluded from taxable income. There is no limit on the number of times this provision of the tax code can be used.

Interest and property taxes on a second home are deductible each year. Add to that the advantage of tax-free capital gains and it’s easy to understand why many boomers will move from home to home. Having such favorable tax advantages can help build a comfortable retirement.

According to National Association of Realtors® study,”Leisure activities of interest to vacation-home owners include beach, lake or water sports, 57 percent; boating, 38 percent; hunting or fishing, 32 percent; golf, 21 percent; biking, hiking or horseback riding, 20 percent; ski or winter recreation, 17 percent; and tennis, 9 percent.” It’s no wonder Northwest Arkansas is so popular!

Boomers are in the midst of their highest-earning years. They realize the benefits property ownership provides. Not only do boomers understand the value of owning property, they understand the value of diversifying their assets.

More than half of all rental property in the United States is currently owned by boomers. Some own only one rental, but a considerable number own five or more properties. And NW Arkansas, despite the recent rise in multi-family prices, still provides good opportunities for investment.

Boomers have also branched out to ownership of commercial property and undeveloped land.

If I can help you find property that may help with your overall plans for home ownership now or in your retirement, please call me. I can help you find investment properties or land as well as a nice retirement home. And if you want to purchase a second home elsewhere, I communicate regularly with agents from all over the country who may be able to help.

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