Some Market Stability Signs
May 6, 2009
The April magazine published by the National Association of Realtors had an article which addressed 4 common questions buyers are asking.
1. Why are the prices of homes dropping substantially in today's market?
According to Professor Karl Case of Wellesley College and a contributing author of the Case-Schiller Home Price Indices, we experienced abnormal appreciation from 2000-2006. The average appreciation for that period was 89% compared to a normal average appreciation in the years 1980-2000 of 26%. The market is moving back to the norm. (By the loss of appreciation, I think the theory is that the losses plus the gains will bring the decade 2000-2010 more in line with the 26%. It will be interesting to see if such an adjustment occurs.)
2. How do I determine the direction of prices in my market?
Supply of inventory is one guideline that is used to determine market direction. According to the article, a normal or balanced supply has 5 to 6 months of inventory. (total active listings divided by the number of houses sold per month) You can check the numbers I reported on the May 4 blog and do the calculations with the number of properties in escrow or you can use the number s of closed sales that I will be posting tomorrow, May 7. The chart in the article indicates that a 1-2 month supply is double digit appreciation, 3-4 is single digit, 5-6 is balance, 7-8 is single digit depreciation and 9-10 is double digit appreciation.
3. Why should I buy now?
4. Is home ownership really a good way to build wealth?
I will discuss the answers given for these questions in next week's blogs.
The April magazine published by the National Association of Realtors had an article which addressed 4 common questions buyers are asking.
1. Why are the prices of homes dropping substantially in today's market?
According to Professor Karl Case of Wellesley College and a contributing author of the Case-Schiller Home Price Indices, we experienced abnormal appreciation from 2000-2006. The average appreciation for that period was 89% compared to a normal average appreciation in the years 1980-2000 of 26%. The market is moving back to the norm. (By the loss of appreciation, I think the theory is that the losses plus the gains will bring the decade 2000-2010 more in line with the 26%. It will be interesting to see if such an adjustment occurs.)
2. How do I determine the direction of prices in my market?
Supply of inventory is one guideline that is used to determine market direction. According to the article, a normal or balanced supply has 5 to 6 months of inventory. (total active listings divided by the number of houses sold per month) You can check the numbers I reported on the May 4 blog and do the calculations with the number of properties in escrow or you can use the number s of closed sales that I will be posting tomorrow, May 7. The chart in the article indicates that a 1-2 month supply is double digit appreciation, 3-4 is single digit, 5-6 is balance, 7-8 is single digit depreciation and 9-10 is double digit appreciation.
3. Why should I buy now?
4. Is home ownership really a good way to build wealth?
I will discuss the answers given for these questions in next week's blogs.
posted by shirley harry at 8:12 AM
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