How are we doing, compared to the ‘peak’ years?
To capture the latest frenzy, let’s use the March 1st to April 30th period, and reflect back to see how the numbers stack up compared to previous years:
Today, both sales and pricing are increasing at the same time – similar to the 2003-2004 era, which was the hottest market in recorded history.
This year we had the fourth-highest sales count, and an average cost-per-sf similar to 2004. Average pricing is only 14% behind the peak year of 2006!
With sales being a leading indicator, it appears that pricing should continue to climb.
For those who prefer a bar graph, here are the same numbers:
The number of sales in the 2001-2007 era were abnormal.
The move-up market was in hyper-speed due to two things:
1. The big change caused by getting tax-free proceeds from living in the house two out of the last five years, which was a huge change and goosed the greed in every homeowner’s mind, and
2. Being able to HELOC the old house for the down payment on the new house. Most sold the old house later, but some rented too, but it didn’t matter – you got your equity out.
With today’s “anti-buy-and-bail” rule, the move-up market is very restricted.
Home buying has always been and will always be highly speculative due to:
1.) High leverage.
2.) Interest deduction.
3.) Carry forward and tax free gains.
4.) Non recourse loans.
Over the last 30 years I can’t recall a sustained period where the real estate market would be described as “normal” in the same sense that we apply to other markets. It’s just the nature of the beast.
Jim, who are these super wealthy buyers who are snapping up $1M properties like they are going out of style?
Are these mom & pop types or big wall st investment firm types?
Neither – they are mostly families trying to provide a long-term solution for housing. The old-fashioned ‘putting down roots”.
I’m sure there are plenty, but I haven’t seen one buyer on the tax rolls that looked like a big-time Wall Street investment firm. I’m sure they have generic names and are hard to ID, but really no investor types at all in the $700,000+ market other than J. Mann.