"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
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