By Dave Leonard
Please note:all real estate is local. . .the following information pertains to housing in Columbia, Ellicott City and other parts of Central Maryland, however in general is pertinent to most housing in the Northeast as well.
PAST – While housing appreciates (or occasionally falls) in value from year to year, the plusses and minuses are never totally constant. From the med-1970’s through 2000, the average appreciation was 5.5% per year (compounded). That’s for almost all price categories. From 2000 through 2005, the total appreciation was between 100% and 120% (total); greatly outdistancing any previous time span in the United States during the past 60 years.
This meant that your $300,000 home in January of 2000 was worth between $600,000 and $700,000 by December 2005. Why? It appears to have been a perfect timing of events including record low interest rates; record high owner occupant demand for houses and investors “fleeing” a sinking stock marekt. In fact, from mid 2004 through the end of 2005, there were more non-owner occupant purchases, by a wide margin, than ever before.
PRESENT –The current market began to slow in the Sping of 2006 and has really slowed down since July 2006. For example, from 2000 through late 2005, the average time on the market (TOM) for homes in good condition with no deficiencies was less than 15 days. In the past three months, the TOM has increased to between 60-75 days. Exeptionally good homes which are priced “to the market” (e.g. not overpriced) are still selling in a timely fashion. Overpriced homes, however, even those A+ beauties, are not moving.
While it’s hard to put a true number on how much the market has “corrected” since late 2005, it appears that sale prices are off between 10% and 20% from those high water marks. That means your January 2000 home worth $300,000 is now worth $500,000 to $550,000. That’s still an overall increase of 75-80% for the period, which far surpasses the long-term appreciation averages of 5.1% in the past.
FUTURE –While no one’s crystal ball is perfect, most experts and folks like myself who are out in the trenches everyday, feel that the “bottom of the curve” should occur sometime this winter. When the Spring market starts (right after Super Bowl Sunday) we have an excellent chance of a return to a “normal market” (i.e. housing values rising in the 5-6% range yearly). The prospects are especially good for the resale market since the amount of new homes in the pipeline has dwindled. Interest rates are still great (low 6% range) and almost every prognosticator feels that rates will remain in that range for some time to come. So, while we’re a bit “cloudy” today, prospects are for “sunny and warmer” housing conditions in the near future.
For a free market analysis of your home contact Dave at 410-415-3266 or Teri at 410-715-3261 or sign up on our website: www.MarylandGreatHomes.com.
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