Duxbury home price appreciation - 10 year chart
Here's a very helpful graph! It shows how Duxbury home prices climbed in the early years of the last decade, topped out in 2005, and then declined to their 2002 levels in 2010, and have remained in a narrow price band for the last three years.
What's important for homeowners to notice and, hopefully, take to heart, is that the prices home buyers paid between 2003 and 2008 were abnormally high. Even from today's price levels, the median price paid per square foot would have to increase 15-25% to begin to reach the exaggerated prices paid at the height of the boom.
There is quite a bit of hope and anticipation that such an increase is imminent! In certain towns on the South Shore, and in certain months, there have been indications that buyers are more willing to pay higher prices. At the same time, it is very clear that homeowners who list their homes at prices above the current market are not able to sell their homes at all.
That may sound like the normal reality that overpriced homes don't sell, but what I'm driving at is that there aren't many buyers who are stepping over the line of current value and stretching into an area where they are paying more now in the hopes that future price appreciation will bail them out.
We certainly saw that kind of speculation and expectation in the middle of the last decade, when people were very willing to overpay because the house they were buying would be worth more tomorrow. In the stock market, that delusion is called the "greater fool theory": even if I am being foolish today, there will always be a greater fool who will buy from me at a higher price tomorrow. As with every other boom, the cycle ends with a bust, and some people find out, too late, that they were the greatest fool.
Today, I hope that we continue to have a strong and steady market, buttressed by reasonable Federal Reserve and lending policies, a strong economy, competent legislation on issues like flood insurance, and relatively few external shocks to the housing market. In that environment, prices should remain strong and rise slowly, giving both buyers and sellers the confidence they need to make rational, long-term decisions that benefit themselves and the economy as a whole.
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