Do you think we will ever learn? I don't. You know, when something is going gang busters, you throw money at it and you make money that blows your mind and makes you laugh all at the same time?
I say STOP all the doom and gloom on television. They have no clue what they are talking about. Yes, are the banks screwed up, sorry but most of that is their own fault. Well, this post is not about that and I am not going there right now. We are at a normal price range for the most part in my area!!!
Do you really think that 40% a year is normal appreciation?? Take that for 5ish years in a row??? Is purchasing a home $100,000 over the asking price with no appraisal contingency via an escalation clause, normal?? You know in your heart your house, or any other, was NEVER REALLY worth what it topped out at?? I know you will argue supply and demand, I will just say BS, and then I will say Dot Bomb right afterward. Remember, we never learn our lessons. Do you REALLY think that it would go on forever??? Hello??? Our incomes could not keep up with it. People would say, I bet you are making a killing right now selling real estate? I would say sure, but it evens out for the slower years we are not as busy. It is called a market for a reason.
So what goes up, must come down, right? Why is it that 40% appreciation, or whatever your number was in your specific area was, was considered "normal", but 40% depreciation is abnormal?? Maybe "normal" is the wrong word? Maybe "Acceptable" is the word I should use? The point I want to make is that if we would have not gone on the roller coaster ride of market values we have just been on, our values would be where we are right now anyway.
For the sake of argument I am going to do a little comparison for you to show you that we are now at a "normal" market value. Now, I am not a fancy graph maker, so here it is going to be in black and white for you. I will call Altos Research later to make me some graphs.
So Let's pretend the real estate boom didn't happen and we had steady growth. Where would the numbers be? We will use my first house I ever owned as the comparison. I loved that house, much bigger than it looked and I fixed it up beautifully. If we use 8% appreciation, which is a number financial folks will use with you for your investment accounts for steady appreciation of your stocks and bonds. So let's use 8% for the sake of this exercise.
In 2000 I sold my house for $200,000. Thought I stole every dollar from those folks. It topped out at $450,000 in 2006.
Let's just use my 8% and see where this exercise goes.
2001 $200,000 x 8% = $16,000
2002 $216,000 x 8% = $17,280
2003 $233,280 x 8% = $18,662
2004 $251,942 x 8% = $20,155
2005 $272,097 x 8% = $21,767
2006 $293,386 x 8% = $23,470 BTW, it sold for $400,000 that year.
2007 $316,856 x 8% = $25,348
2008 $342,204 x 8% = $27,376
2009 = 369,580.
Do you know what the exact same floor plan in that neighborhood sold for in October of 2008? With prices going up and coming down? The same model as mine sold for $351,000, plus the seller paid $5000 towards the purchaser's closing costs?
Basically the same as the value that I show you in 2008??? The $342,204!!!
Try this experiment on your house or an area that you know really well and see if the 8% appreciation and today's value are close?
So why don't we just stop thinking the values are so bad, they are more normal now, people can actually afford their house payments the old fashion way, with principle and interest!!
Yes, this is not good news if you purchased your home in 2006 and are trying to sell your home now.
This post is not about that, it is about steady appreciation. I know that is too simple and perfect of an a example, but maybe one year would have been 5% and another 12%? We are talking averages.
Maybe we should change the way we are thinking about our market and start to think it is a normal market? Get rid of the doom and gloom, let's dust our butts off and move forward.
For more information, contact Audrey June- Forshey RE/MAX Reatly Group 301-938-8028,
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