Lets take another stab at the future of real estate values in the Wasilla and Palmer area. There are a lot of things to consider…here are some.
National Economy, This is all about the dollar, debt, and global issues.
State Economy, It’s Oil…Oil…and Oil. Oh, and a little hope for natural Gas.
Local Issues, like schools, quality of life, property taxes, distance to jobs.
There is another way to measure the movement of future real estate prices and that is by looking at current rent costs compared to the cost of purchasing a home. I’m going to do a little of that in this post.
Rent Cost vs Purchase Cost
The cost of renting real estate moves faster than the home values do and give an indication of future real estate prices. Here is one article discussing this measuring technique. Where’s Housing Headed? Follow Rents
Checking the local rents on houses compared to the monthly payment if purchased, and then adding in a maintenance cost of 2% of the home value per month I find that the rent costs for local housing is almost equal to the cost of purchasing.
If you read the article you find that the nationwide average of rents compared to purchase is about 87%. That is, people would be willing to pay $1,000 per month to purchase a house that they could rent for $870 per month. They are willing to pay this premium because they can decide if they want a pet, build a fence, or paint a room.
In some of the most overpriced markets in the country the ratio is about 70% meaning home values in those areas are likely to decrease even more than they already have. One of those areas is Seattle, Washington.
Because our area is more transient them most places in the country I believe that renters are willing to pay higher prices for the ability to move whenever they want to. For that reason, it is likely that a 1:1 ratio of renting vs buying may mean a fairly stable market. This seems to be about the ratio in our area right now.
I will take a look at some of the other indicators of future real estate prices in later posts.