Mathematician Gives Us Lesson on Real Estate Market Recovery
We have been using this chart for several years in our listing presentations. It clearly shows the "bubble" our market went through before peaking at the end of 2005. The straight line represents the historical line of home appreciation over the last 60 years ~4% annually. The message to sellers being that at the current prices levels (15-20% below historical), it will take 5-15 years to appreciate back to trend line.
The mathematition challenged this assumption and we ended up agreeing with him. His point was that building labor and materials have not gone down and in fact have increased. Thus when the current inventory of unsold homes goes down, and builders again start building and selling, it will have to be at the significantly increased prices and will quickly return our prices to the trend line!
This also makes sense from the perspective of where the 4% home appreciation comes from. This is very close to the historical annual inflation number. So home price rise with the rest of the commodities.
So the bottom line, the mathematition is probably right. So this is our revised forecast! Any thoughts?
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