Inflation adjusted prices (Charleston, North Charleston, Summerville: low income, fit in, real estate market)

[OleTomCat]

No wonder there is such a large error, that thing is so broad based....

Nevermind......

It isn't worth the arguement......

[zpduda]

Yeah, the error on the first one did make a big diff. The actual rounding error in the percentages is less than 1%

[gaflsc]

Originally Posted by zpduda

What is this based off? What is your rational and data to back it up?

Simple. It's based on supply & the median income for the area. The fact is, there's a HUGE disconnect between median income & housing prices, and it will take time for that to fall back in line.

[zpduda]

How much of disconnect is there to the medium income and Charleston/Summerville as a whole? I bet it is not as much as MP. But this is the key point. Is MP where the medium income people live? Probably not. It is probably where the upper middle class (e.g. above medium income) people live. Every city has the rich (MP, Daniel Island), average (Summerville, Goose Creek), and poor (North Charleston) areas. Don't kill me if these areas are not exactly correct...just trying to make a point.

For example, here in DC there is area called Great Falls where the average home price is probably 1.5M. Is this overpriced...yes for the medium income person in DC....but not the millionaire partners, lawyers, etc who live there.

It is not reasonable to expect that every area in a city be affordable for the medium income person.

[guttata]

Honestly, if you think now is the time to buy, then just buy and be happy with your decision. I don't see the need to justify your decision.

You assume that homes in 2004 were not overpriced in the first place. Also, the prices listed are sales price. If you check the MLS, many sellers have not come down from 2005-2006 prices (at least listing prices). When the market does turn around, there will be fewer qualified buyers for these expensive, overinflated homes. Banks will not allow folks to stretch their incomes given the pain they are in now. Something has to give. Richer people move in or home prices will drop. Caveat: the Charleston market may be a little unique given the number of retirees with higher purchasing power.

Home inventories and time on market are very high right now. This isn't going to turn around overnight.

The formatted data you get from real estate agents can be skewed. I like my agent a lot. But, all agents have a financial interest in selling homes. No sale, no commision. They are not going to convince you not to buy (and I don't think it's their responsibility). I doubt many agents are buying homes themselves (for investments or primary residency) right now.

[In the Pines]

I really like the idea that we may currently be in the bottom of the barrel and things will improve from here. I'm all for optimism - that's half the battle! From personal experience, I don't see home prices dropping dramatically in my neighborhood - that's a positive. Also - I've been watching home prices in our future town in Virginia and they are staying very stable - microscopic change in prices from a year ago. Sure - this is anecdotal evidence but it offers a glimmer of hope.

[zpduda]

I am not looking for justification. I am just bored and have nothing better to do.

You are correct that I am using 2004 as an assumption. Prices could fall to 2003-2000 prices, but I think mass inflation will take care of that. If the bailout passes at 800B, we are looking at a 2 Trillion dollar deficit this year alone. The gov simply do not have this money so the printing press will be working overtime. Not saying I like it, but an inflationary period is steadily approaching. Oh, the fed reserve report today stating that no inflation indicators are present is total bull. Real estate is a very safe place to house your cash during a high inflation period.

[zpduda]

Originally Posted by In the Pines

I really like the idea that we may currently be in the bottom of the barrel and things will improve from here. I'm all for optimism - that's half the battle! From personal experience, I don't see home prices dropping dramatically in my neighborhood - that's a positive. Also - I've been watching home prices in our future town in Virginia and they are staying very stable - microscopic change in prices from a year ago. Sure - this is anecdotal evidence but it offers a glimmer of hope.

Where are you moving to in VA?

[In the Pines]

My father is in Lovettsville but we are looking to move around the Bristol, TN area (VA side) for ease of travel to my husband's customers, etc. No set moving date - just whenever and if ever we sell our Summerville home. Are you familiar with Lovettsville? I considered heading there but the cost of living is quite high if I'm correct.

[rubber_factory]

Originally Posted by zpduda

Real estate is a very safe place to house your cash during a high inflation period.

I have been wrestling around with this inflation/deflation thing. For one, even with the printing presses running red hot, this is still a global crisis, not just a national one. Even the most experienced, most informed people out there can't say if we'll see inflation. Home values in my area (not Charleston, but not too different either) are still bubbliciously high (in my opinion), so for me, buying would be an inflation-based roll of the dice.

Having said that, my understanding is that Real Estate is a great hedge against inflation only if incomes rise. What happens to home values if incomes stagnate, while costs like taxes, insurance, gasoline, etc. gets more expensive, along with an increase in interest rates? You might be secured with a low-rate mortgage, but I can't imagine values holding fast in that sort of environment. Anyway, at this point, it stands to reason that the federal government has control over the long-term direction of housing values, since they control the money supply. We might be running the printing presses, but who knows where that money will end up, or when it will begin to circulate, and into whose hands?

Anyway, I would be skeptical of the data your Realtor provided. I am skeptical because he used average prices instead of median prices, and because the statistical report implies (without directly stating) that 2004 was 'the beginning of time,' so to speak. I also don't trust inflation data from the government. You also have to wonder if those numbers are raw data, or if they have been "prepared" at all, with certain inclusions or omissions.