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Strange to think that prices will rise as we head into a deep deep recession! As for prices, maybe not a bubble, but certainly much higher than a few years ago.
I have not stated that prices WILL rise. I have stated that they have been flat to slightly increasing on average, depending on area. Location, location, location. Also, if you check the appreciation rates, you will not see big appreciation rates here. Just because they build bigger homes that result in a higher price does not mean prices have appreciated at a higher rate. Please compare apples to apples.
According to government data (OFHEO same-house sale data for prices, HUD for incomes), median income has gone up 20% in this area since 2000, while house prices have gone up over 40%. The disconnect between house prices and income isn't a good sign. I think that's part of what's going on in the lack of sales - for various reasons, buyers are no longer able to pay what sellers are wishing they could get. Credit is getting tighter (returning to pre-bubble standards), people can't sell their houses in NY or CA for crazy amounts of money, and the job market is slowing - all of these add up to a reduced amount of money in the system.
As others have pointed out, with a recession just getting started I think the most reasonable assumption on how to get that back in line is for prices to come down to what buyers can afford to pay. I guess it's also possible for salaries to go up in the midst of layoffs and a general slowdown in the economy, but that didn't happen last time we had a recession around here.
I don't think people realize just how much prices DID go up in the Raleigh area over the past 5 to 8 years. Everyone compares it to CA, FL, etc., but just because those places had runups of 200% doesn't make 30% (or whatever the triangle had) "normal" or sustainable. I sold 3 homes in the triangle over the past 8 years after owning each of them less than 2 years and broke even or made a profit on all of them, even after paying a real estate agent. That is NOT a normal market. Home prices in this country are falling everywhere, not just Florida and California.
According to government data (OFHEO same-house sale data for prices, HUD for incomes), median income has gone up 20% in this area since 2000, while house prices have gone up over 40%. The disconnect between house prices and income isn't a good sign. I think that's part of what's going on in the lack of sales - for various reasons, buyers are no longer able to pay what sellers are wishing they could get. Credit is getting tighter (returning to pre-bubble standards), people can't sell their houses in NY or CA for crazy amounts of money, and the job market is slowing - all of these add up to a reduced amount of money in the system.
As others have pointed out, with a recession just getting started I think the most reasonable assumption on how to get that back in line is for prices to come down to what buyers can afford to pay. I guess it's also possible for salaries to go up in the midst of layoffs and a general slowdown in the economy, but that didn't happen last time we had a recession around here.
I think what will most likely happen is the return to the construction of somewhat smaller homes. Appreciation rates were not high. Existing homes prices have not skyrocketed. It was the fact that many new homes being built were HUGE, so they cost more. So now that people can't sell their homes elsewhere and cash in here, we may see more "normal" size homes being built, which IMO is a good thing. The return to "normal" lending practices would also be a good thing, but don't bank on that lasting long. I see that our wonderful government is still trying to force home ownership onto those they cannot afford it. I guess they have not learned from their mistakes.
Just one example...I bought a townhouse in Glenwood North for 160k in Dec. 2005. I sold it in Dec. 2006 for 175k. Made no improvements whatsoever. The girl who bought it from me JUST sold it for 172k.
I think what will most likely happen is the return to the construction of somewhat smaller homes. Appreciation rates were not high. Existing homes prices have not skyrocketed. It was the fact that many new homes being built were HUGE, so they cost more. So now that people can't sell their homes elsewhere and cash in here, we may see more "normal" size homes being built, which IMO is a good thing. The return to "normal" lending practices would also be a good thing, but don't bank on that lasting long. I see that our wonderful government is still trying to force home ownership onto those they cannot afford it. I guess they have not learned from their mistakes.
I don't know that it was a bubble, but look at the Weatherstone neighborhood in Cary. I know people that owned a home in there for 18 months and made almost $100k (about 28% over 18 months). Houses that sold in 2003-2004 for mid to high $300s were worth high $400s by the middle of 2007.
I don't know that it was a bubble, but look at the Weatherstone neighborhood in Cary. I know people that owned a home in there for 18 months and made almost $100k (about 28% over 18 months). Houses that sold in 2003-2004 for high $300s were worth high $400s by the middle of 2007.
Appreciation rates will vary greatly depending on location. You will find some neighborhoods that have dropped in value and others continue to appreciate well. Cary is a great place to be when there is a downturn, as values will be stronger because of the popularity of the town. I know some people in the neighborhood I bought into that have appreciated 12.5% in the last year. This is an apples to apples same exact model comparison from what they paid last year to what recent ones have actually sold for. That could qualify as "bubble", but that is just one neighborhood. When you combine the entire town or county, as they do when compiling the numbers, you will see much more even appreciation rates. We are far from a "bubble" market.
According to government data (OFHEO same-house sale data for prices, HUD for incomes), median income has gone up 20% in this area since 2000, while house prices have gone up over 40%. The disconnect between house prices and income isn't a good sign. I think that's part of what's going on in the lack of sales - for various reasons, buyers are no longer able to pay what sellers are wishing they could get. Credit is getting tighter (returning to pre-bubble standards), people can't sell their houses in NY or CA for crazy amounts of money, and the job market is slowing - all of these add up to a reduced amount of money in the system.
As others have pointed out, with a recession just getting started I think the most reasonable assumption on how to get that back in line is for prices to come down to what buyers can afford to pay. I guess it's also possible for salaries to go up in the midst of layoffs and a general slowdown in the economy, but that didn't happen last time we had a recession around here.
I think you are pretty much right on in your analysis. Although I am not sure that I totally agree that Buyers are unable to pay the prices Sellers are demanding. To some extent it is usual in a market like this for Sellers to have a hard time coming to grips with a new reality. In the stock market price discovery is nearly instantaneous. If you want to sell your shares of Wachovia (just an example) it is very easy to see the Bid and Ask price for a share of Wachovia. So, if you list your shares that you would like to sell well above the latest Bid price, you will not sell your stock and it will sit and sit and sit. Now, you may HOPE that the price will recover and get back to where it was a year ago. But, in the meantime your stock will just sit. Same deal with real estate, except that there is a whole lot less clarity. Sellers can see the ASK prices of similiar houses, but in a changing market it is difficult to discover the BID prices. Well, when the ASK prices do not come down then inventory rises and houses sit. Sellers are hoping that the Bids will rise. That is the situation, that is why inventories are so high, sales so minimal and time on the market so great. As in every other area of the country, this will resolve when the Sales prices decline sufficently to meet the lowered Bids that are always out there.
The people that continue to post that "all is well" "prices are rising" "we are different" "there is no recession" are just whistling dixie. A little research (and for those of you that do not like the "media" you can do much of the research yourselves today!) will show that the economy is entering (or entered!) a very difficult patch. The credit crisis is real. The Global economy has slowed significantly. Unemployment has risen dramatically and probably will continue to rise for some time. It is a difficult environment to sell anything, houses are no different.
The best advice is to do your own research, it is not very hard to see what is going on. It is probably a lot harder to predict where things are going. But, be very careful basing any decisions you make on postings by anonymous people on sites like this that may very well ahve their won agenda (rather than just telling the truth!)
But, be very careful basing any decisions you make on postings by anonymous people on sites like this that may very well have their own agenda (rather than just telling the truth!)
Appreciation rates will vary greatly depending on location. You will find some neighborhoods that have dropped in value and others continue to appreciate well. Cary is a great place to be when there is a downturn, as values will be stronger because of the popularity of the town. I know some people in the neighborhood I bought into that have appreciated 12.5% in the last year. This is an apples to apples same exact model comparison from what they paid last year to what recent ones have actually sold for. That could qualify as "bubble", but that is just one neighborhood. When you combine the entire town or county, as they do when compiling the numbers, you will see much more even appreciation rates. We are far from a "bubble" market.
There was a lot of bubble money coming in and buying up "bargains" in Cary. In the but for world (where unqualified buyers didn't get loans) house prices never would have gone so high. Increased unemployment and the risk of a long recession are certainly not going to help.
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