This is the age old question everyone asks. How is the market doing? Have we bottomed? When will prices go back up? When will my home be worth what I owe? How long until we get back to 2005 prices? Should I sell or rent?
Actually we get more questions than this, like should I pay my mortgage, should I pay my homeowners association fees, etc. We’ll stick with the value questions for this article.
We’ve included a graph illustrating median prices since 2008. Median prices don’t tell the whole story, but they do tell a story. The definition of median price is half the sales are over and half under a certain price. As you can see, prices have fallen sharply since January 2008, and even more dating back to 2005. Ironically, home sales are up and setting records precisely because home prices have fallen. We’ve explained this in depth in past articles.
Average sales prices were approximately $365,000 back in January 2008 vs the median price of $225,000. We have been watching how the average and median price are related, and we have a chart in our annual State of the Market Report on Pg 4 that shows the relation over time between the two. This report can be found at www.Topagent.com
The average price gives us a little more depth to the market and helps us understand the overall breath of the market. As we’ve been saying for quite some time, we expect higher priced foreclosures and short sales to actually pull the median price up, and we believe this will occur. This past week official numbers were released, both statewide and nationwide. Prices actually fell 3.3% vs. last month, and were down 9.74% from last year.
Some might ask if we do all this research, when will our predictions come true. Our best estimates have been we could see year over year price increases as soon as March or April data. March data won’t be released until next month, but keep in mind these are only predictions about the future and nobody knows for certain. We are fairly confident this will occur; the question is more of when.
We have been looking at both median and mean average sales price data and it appears that prices for both dropped since December 2009 as official data would indicate, however were are seeing some price increases in March data that would indicate this trend has reversed, at least temporarily. Keep in mind we have many more closings that occur at the end of a month that could skew the data, but the trend looks good.
We would also expect sales this time of year to be higher as our Northern visitors are here and buying property as well, and many of these sales are in the higher than median price range. Many of these sales will occur past March into April and May, and many will come back and buy in the summer.
Ultimately prices will be determined by jobs and the economy. As more people get back to work, it should slow the foreclosures, and bring more people to the area. When will this occur? I think it’s so much easier to forecast prices in the short term than predict the overall economy. Congress has been focused on health care and the climate more than the economy, so it’s really hard to predict what’s coming out of Washington and how it will affect us and the economy, especially since we’ve largely been kept in the dark until something passes.
We would encourage our government to turn its attention to actually helping the economy, or get out of the way so small business can begin creating jobs and getting us back on our feet. Once the economy starts looking up, Main Street can begin to recover and prices can begin to rise. Our prices are artificially low, and they won’t stay that way forever. Prices are well below replacement cost, so builders are on the sidelines now as they don’t wish to build at a loss. Our market will increase in value perhaps 40-50% before this occurs, and this is why buyers today have a chance at building substantial equity quickly.
Once the dust settles and our market reaches price equilibrium, builders will be building again, bringing more jobs to the area and sustainable price appreciation. Good times await those who buy now and ride the coaster on up to equilibrium.
Be sure to check our latest video on the Flood Insurance Crisis affecting home sales.