Yesterday I received an email that read, in part, "I find it curious that realtors say "prices are going up" while the value of existing homes are going down. Which is it??"
Well, here's the thing. When we talk about "the market" we are looking at the big picture. "Prices are going up" is a generalization and usually refers to "average" or "median" price points for a large area ~ like the Washington DC Metropolitan area. It doesn't mean the price of YOUR home is going up. It doesn't even mean that the price of the SAME home is going up, it means that we're seeing more sales at a higher price point. It's a recovery sign, for sure. But what does it mean to you?
Real estate is not just local, it's hyper local.
The person I was talking to owns a townhome in Victory Lakes, in Bristow VA, so I gave the specific examples.... in Prince William County, in a year over year comparison from December 2009 to December 2010, the median sales price is up almost 18%. Then, in a similar year over year comparison for the same period, the zip code 20136 (where Victory Lakes is) the median price is down almost 24%.
Bristow had a lot of building during the boom years. As a result, most homeowners in that area remain "upside down" (owing more on their mortgage than their home is worth today). So, when life happens, that house becomes a foreclosure or short sale, and that submarket is saturated with distress sales. In neighborhoods where there are both "traditional" sales and "distress" sales, distress sales fetch anywhere from 5-15% less than the fair market value for an otherwise comparable traditional sale. The more distress sales in a sub market, the less difference there is in sales prices. If all your comps are distress sales, then your home, as a traditional sale, will sell for about the same as the distress sales.
In Victory Lakes, build out continues. So, not only is a traditional seller competing with distress sales, so is the builder. As a result, the builders must present a value. For example, when looking for comps for this particular homeowner, I found the highest priced semi-comparable resale, a short sale, which sold for $275K, backed to a lake, had 3 finished levels (about 2500 sf), was an end unit and gorgeous. Miller and Smith is currently selling similar sized homes, with 3 finished levels above grade, BRAND NEW and a detached 2 car garage for around $315/320K and they are paying closing costs for the buyer (assume about $10K for that). While it is still higher priced than the resale/distress sales, it presents a value for the prospective home buyer. So, a comparable "traditional" (non-distress) sale must fall in that range and have a comparable value in order to be even considered by potential home buyers.
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