Does buying a home in the Dubuque area pose a risk to buyers? Absolutely! Buying a home in any market throughout history always involved some level of risk. That’s why buying a home is serious business – while it can be an exciting, and quite often fun, process, it still needs careful thought and consideration.
The question here is “How Much Risk?” is there in the Dubuque real estate market. Let’s turn to an outfit that regularly assesses the risks in real estate markets all over the United States. I’m talking about the good folks at PMI Mortgage Insurance Company. PMI provides private mortgage insurance, hence the PMI in their name. They are not the only provider of mortgage insurance, there are many other providers. According to BankRate.com…
If your down payment on a home is less than 20 percent of the appraised value or sale price, you must obtain private mortgage insurance, known as PMI, with your lender. This will enable you to obtain a mortgage with a lower down payment because your lender is now protected against any default on the loan.
PMI rates and ranks the largest 384 real estate markets throughout the US, of which Dubuque is one. One rating they calculate is the Housing Appreciation Risk Index. It assesses what is the risk is that a given market will experience a decline in home prices over the next year. A lower score, 10% or less, indicates a minimal risk of falling home prices. A higher score, 70% or more, indicates a high risk of prices falling over the next year.
Just like in golf, you want a lower score. Buy a home in a market with a lower score and you can be relatively confident that the home’s value will be more, not less, than purchase price in a year.
For example, the Boulder, Colorado market is running a 29.2% chance (low risk) of reduced home prices over the next year while Flint, Michigan is running a 56.1% chance (elevated risk) of decline, while Ft Lauderdale, Florida is running a 90.5% chance (high risk) of a decline.
Let’s take a look at the US map, showing by real estate market, where prices are riskiest…
Hmmm, notice anything? Let’s zoom in on IOWA…
The preponderance of light blue colored real estate markets in Iowa, when compared to most of the US, shows that you won’t find a better performing concentration of real estate markets around than Iowa, especially eastern Iowa. So how is Dubuque and the other eastern Iowa markets rated on the Housing Appreciation Risk Index…
- Dubuque 7.6% (minimal risk) of house price declines over the next year!
- Cedar Rapids 8.7% (minimal risk)
- Waterloo 7.8% (minimal risk)
- Quad Cities 9.8% (minimal risk)
- Iowa City 6.6% (minimal risk)
If I were a casino manager and I ran the tables in such a way that the gamblers only had a 7.6% chance of losing, I’d be out of business before lunch on opening day. Real Estate isn’t quite the same as casino games, but yes, they both carry certain levels of risk.
According to the data analyzed by PMI, the odds of a current year Dubuque home buyer getting burned at the real estate table are pretty low - it’s not a guarantee – but I’d take those same odds at the blackjack table all day, any day.
Hmmm…I wonder…is it any coincidence that Ruhl & Ruhl serves the majority of these high performing real estate markets? I’m just saying…