Here's a very interesting fact I found on Yahoo -- people seem to think their houses are worth more this year than last year. The details:
Although existing homes are selling at their slowest pace in four years, most Americans are confident their homes are worth more now than they were a year ago, according to a survey released on Thursday.
A poll conducted by the Boston Consulting Group found that 55 percent of Americans believe their house would sell for more money now than last year, compared with 59 percent who felt the same way last summer.
What are these people smoking? Sure, in some localities home prices will increase versus last year. But 55% of the country? Seems high to me. I think people are just 1) optimistic, 2) emotionally attached to their home (and thus not able to make a reasonable valuation) and 3) not wanting it to sell for less because they couldn't afford to sell it for less.
Consider these facts in support for my thoughts:
Homeowners remain optimistic even though existing home sales last month hit their lowest rate since June 2003.
While record rates of homes entering foreclosures and weak sales figures have troubled analysts, 63 percent of the 1,007 homeowners surveyed still see real estate as a solid investment.
Then again, maybe they are right after all:
National surveys of home prices seem to bear out at least a degree of optimism, showing prices still rising, if only slowly.
According to the Office of Federal Housing Enterprise Oversight, the average U.S. home price rose 4.3 percent over the year ended in the first quarter, the smallest gain in nearly a decade.
I'm wondering if these averages are being driven by higher-priced homes that are skewing the results upward. I wonder what the median price increase (or decrease) is.
In the end, I think we'll be fine. The piece comments:
Eighty-five percent expect their home to be worth even more in five years than it is now.
I agree with this. In the long-term, I think housing prices will go up. But for the next couple years or so, I'm not so sure -- especially in my area of the country where things are worse than average. Great time to buy, though. ;-)
Actually I think you may have it reversed.
Certain formerly "hot" markets like Las Vegas, San Diego, Phoenix, etc. saw huge declines in equity/home prices the past 1-2 years, as a result of an unstainable sky-rocket in price the previous 5-10 years. Without having done a ton of research into it myself, I'd nonetheless suggest this may be dragging the nationwide "average" home price down a bit or at least showing a very slow growth rate.
What evidence do I bring to the table? Well things are just chugging along like normal here in Iowa--not unlike much of the midwest--as we have seen little acceleration in growth rate, just holding steady at 3-4% annually, and this hasn't changed despite all the "bad" housing news.
Posted by: Jonathan | July 06, 2007 at 02:07 PM
Just bought a house in central Massachusetts, and I have to agree with you, FMF. There will always be high demand for housing in this area, but prices are staying steady or edging downward right now. We're planning on staying in this house for a long, long time, so it doesn't bother us if our house value goes down.
Posted by: Anitra | July 06, 2007 at 02:24 PM
I'm sure i'm no representative sample, but home sales just jumped this past month in my area. My neighbor is a real estate agent and has two homes that jsut sold in my neighborhood at above asking price. He has told bme that some people were waiting it out for thee best deals and were stranded when rates went up and now have saved a bit more money and can afford to buy again.
Zillows extimate of my property value has gone up 1.5% in the last 2 months. Now, most of this is to return to its value at before the drop in the market. It is now at $180k, the same level it was at when last appraised in early 2005
Posted by: broknowrchlatr | July 06, 2007 at 02:29 PM
My wife and I live in a desirable, but not overly expensive suburban neighborhood. The houses are similar enough in size and amenities that it is very easy most of the time to estimate potential prices from comparable properties. As a result, houses are usually priced well enough that they sell quickly. Usually, when we see a house on the market for 2 months, it is either overpriced, or they have an offer pending and the closing is dragging out a little bit.
However, in the past month or two, we've noticed more housing staying on the market longer. I can do the math. There's been a downturn and the houses on the market aren't being priced to take that into account. My guess, based on what I'm seeing is that the downturn has hit our neighborhood to the tune of about 5-10%.
Having sold a rental property last year, I can honestly say that you can sell most real estate fairly quickly if you price it correctly. Unless you need to get out quickly, you don't want it priced to sell the second it is listed. On the flip side, you gain nothing by pricing a house too high. No buyer in his right mind bases what he's willing to pay on how much money the seller needs or wants to get out of the property.
Posted by: Anonymous | July 06, 2007 at 02:43 PM
I've been in my first house for about a year and a half now, and I have no idea if my house is worth as much as it was when I bought it or not. I'm sure that if my house had stayed on the market another 6 months that I could have gotten it cheaper than I did, but we're happy with what we got and we have no intention on moving for 8 or 9 years. We'll worry about what it is worth then, when it is hopefully mostly paid for.
Posted by: Blaine Moore (First Time Home Owner) | July 06, 2007 at 03:19 PM
Here is NYC, housing prices are up year over year.
This and the comments above just go to show that r.e. is a largely local market.
Posted by: Miguel | July 06, 2007 at 06:15 PM
I think the question that people have to ask themselves is, "are the price increases the result of local or external factors?" While it's great to say that all real estate is local, the truth of the matter is that a lot of people from expensive locals were purchasing property in "cheaper places" for investments, retirement homes, etc. Now as those areas are declining there is the potential for cash-strapped homeowners to not only stop driving up properties in the cheap markets, but also defaulting on their second and third homes dragging down prices in other areas. That said many areas of the country are going to have different housing markets which are affected by different factors be they employment, cultural, or otherwise.
Posted by: cami | July 06, 2007 at 10:26 PM
I bought my home 4 years ago thinking that it was a good investment. I'm not so sure now. Hopefully, the housing market around my area will pick back up.
Posted by: Hustler | July 07, 2007 at 12:24 AM