Daytona Beach Home Buying and Inflation

Inflation affects the housing market in the long-term by causing home values to increase. In the short-term, it’s not so easy to determine its affect. Buying now allows you to get a fixed monthly mortgage payment that will never increase as the price of homes rise because of inflation and growth.

We know that inflation has been affecting us at the gas pump and the food store and that many other goods and service prices are rising. Most economists are predicting moderate long-term inflation, but then most economists missed calling the real estate bubble bursting, and oil prices doubling.

We believe that inflation is a serious consideration. Here’s why:

• The declining dollar makes foreign goods more expensive and we import upwards of 70% of manufactured products
• The US government continues to borrow more money and increase the deficit to finance the war in Iraq and bailouts of financials institutions and soon home owners
• Fuel prices, even after the recent drop, have doubled since January 2005
• Interest rates have been artificially depressed by Federal Reserve Actions over the past several years.

Long-Term Advantage of Buying Now

Normally, with inflation rising and interest rates low, it would be a no brainer to say buy now to protect yourself and the value of your money. The factor that complicates matters is that with just about everything else rising in price, home values in many markets continue to fall. The Daytona Beach homes market has been affected by price declines that vary by price range, but we’ve lost 9% over the past year - based on median values. The problem is that these numbers are a poor reflection of the value of any single home. Additionally, homes in the lower price ranges have been selling more than homes in higher ranges. It’s not a good number, but it’s the best we have.

So, yes, we have inflation and deflation happening at the same time. The best time to take advantage of buying a home to protect against inflation is when home prices are rising. That’s not happening.

So what do you do?

There comes a time when you must make a decision, and the decision that you must make is whether you believe in the long-term economic strength of the United States in general and Daytona Beach in particular. Do you believe in the long-term, that home values will stop falling? Most people know that prices will eventually begin to rise. The question of our day is — When?

Buying a Home or Condo in Daytona Beach Now

Benefits

• Good values
• Low Interest Rates
• Choices
• Competition among buyers
• Long-Term Home Appreciation especially if inflation rises

Risk

• Short-Term Prices Drops
• Price Stability
• Economic Instability

If you buy now and inflation rises, here’s how you benefit:

• Lock into a low rate - don’t do an ARM when interest rates are rising. With a conventional fixed rate mortgage, your mortgage payment is fixed while the value of the home rises.
• You will pay the same flat dollar rate with cheaper dollars - while everything else is rising in price, your mortgage payment remains the same. At a 3.5% increase in inflation, the value of the home would double in 20 years. At 5%, it would double at 14+ years. That’s just from inflation, if area growth continues, it will appreciation must faster.

Additionally, there’s no guarantee that mortgage rates will stay at today’s low rates. Mortgage Rates have increased about .6% since early May and we believe they will rise further. You can check current rates at bankrate.com.

If you are qualified to buy a home, and you plan to do so in the near future, consider doing it now. We are getting closer and closer to the bottom of the market. Don’t believe everything you hear and read in the national and local media. Prices in lower price ranges are no longer falling significantly and we have reached a pretty steady level of sales that is close to our pre-boom levels. All real estate is local and Daytona Beach is no different. Trying to time the bottom of the market exactly may be a fool’s game.

The Daytona Beach real estate market is still a buyer’s market, but is close to balance in several price ranges. Please contact me for additional information and opportunities in this market.

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