Real Estate Blog - Real Estate Gumbo

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Real Estate Gumbo

"How in the world did we get in this mess?" This is a question that many people ask me when speaking about the current state of the housing market. As with most complex problems there is no single answer to this question. It is sort of like a good gumbo. There is no single ingredient that makes a good gumbo but rather the combination of many.

In my mind a big ingredient for the housing problem can be seen when you look at the increase in the median home prices over the last 18 years in the U.S. According to the Census Bureau median home prices jumped by 24% from 1990-1995, and 17% from 1995 to 2000. A healthy increase is from 20%-25%.

Then from 2000-2005 the median home price in the U.S. increased by an astronomical 55%. But, that number is only the average across the U.S. In the Northeast home prices jumped 118% from 2000 to 2005 and homes in the West escalated 113%. It is no coincidence that these are two of the biggest areas hit by the decline. The South saw an increase by 50% and the Midwest by 41%, which is still high but substantially lower than the Northeast and the West.

Since 2005 housing inflation has returned to near a healthy state at 28% nationally. But each region has had a much different results. From 2005-2008 the Northeast dropped to 14% increase while the West fell to 3% increase. The South has held steady at 38% increase (still unhealthy). But the those hardest hit are our friends in the Midwest who have seen a -3% decrease since 2005.

The bottom line is that this. A free market will always adjust itself if left alone to do so. That is what we are going through right now...an necessary adjustment. Pain is an unfortunate side affect but we must adjust our expectations as the market adjust.

This information leads to a different question: Why did prices increase so much? Was it because we made that much more money? The short answer is no. Lending practices and law changes contributed as another set of ingredients in our Real Estate Gumbo which appears to have been too spicy for us to handle.

Median Asking Sales Price for the U.S. and Regions: 1988 to Present

U.S.

Total

Northeast

Midwest

South

West

1990
1st Qtr	48,900	97,700	33,500	41,900	100,100
2nd Qtr	65,900	112,300	39,300	49,500	131,800
3rd Qtr	69,000	125,900	42,900	56,600	120,700
4th Qtr	64,600	103,600	41,900	52,500	127,500

Annual	62,700	109,900	39,200	50,400	120,500

1995
1st Qtr	77,800	100,000	55,400	65,200	143,200
2nd Qtr	79,900	90,100	57,800	70,200	138,100
3rd Qtr	77,200	107,000	65,500	64,700	100,000
4th Qtr	75,200	114,100	65,700	62,200	119,100

Annual	77,500	102,600	61,400	65,400	128,300

2000
1st Qtr	85,300	89,700	77,800	76,100	113,900
2nd Qtr	93,700	87,500	86,500	85,100	142,200
3rd Qtr	89,200	82,300	85,100	84,700	134,300
4th Qtr	93,800	123,700	94,400	85,200	126,100

Annual	90,400	93,200	85,800	82,500	130,000

2005
1st Qtr	122,500	170,800	96,000	115,800	208,000
2nd Qtr	134,600	211,500	121,500	112,200	213,500
3rd Qtr	150,700	255,000	135,800	133,200	310,200
4th Qtr	150,000	195,800	126,500	135,900	308,300

Annual	140,100	203,800	121,600	124,100	277,300

2008
1st Qtr	193,000	200,000	120,400	192,600	317,000
2nd Qtr	187,600	233,000	119,500	184,000	310,400
3rd Qtr	171,800	223,100	110,000	159,200	262,100
4th Qtr	162,100	221,400	118,500	154,500	245,200

Annual	178,900	233,800	117,900	171,900	286,800

(Information provided by the U.S. Census Bureau)

Michael J. Johnson, Realtor

843-817-5299

www.providingthelight.com

www.metrocharlestonhomes.com

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Michael J. Johnson, Realtor, ABR

843-817-5299

www.providingthelight.com

www.metrocharlestonhomes.com

"Providing the Light to Guide You Home"

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Posted by Michael Johnson, REALTOR, ABR - Goose Creek SC on 04/02/2009 01:10 PM

Comments (5)

Real Estate Statistics in the Real Estate Market Channel

real estate stats, housing market decline

Originally posted at: Charleston SC Metro Real Estate: Real Estate Gumbo

This post has been included in South Carolina Information Berkeley County, SC Information Goose Creek, SC Information
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5 Comments on Real Estate Gumbo

APR

I think the changes in lending practices was one of the main ingredients to the real estate gumbo.

Thanks for stopping by Mark!

Michael, I don't believe that the market was acting as a true free market which is why we have the dramatic adjustments. The entire industry was being manipulated which took us beyond what the free markets would have allowed for. That's the real issue so some of the historic free market standards don't fully apply here.

APR

Michael ---what an interesting analogy --- you did a great job and gave a lot of useful information. Thanks for sharing.

Mama Liz's Signature

Kate - we haven't had a true free market since 1933 when FDR was elected President. (The closest we have come was with Regan). The economic theory used by most administrations since then was an attempt to keep the market from fluctuating so much. A perfect storm of ingredients including heavily brokered loans which were then heavily traded on the stock market, and a government mandated reduction in loan restrictions (Frannie & Freddie) have all been part of the problem.

Liz - thanks for stopping by.

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