20-25% appreciation per year – how can that happen?

This was my first stab at blogging on September 24, 2005!

It doesn’t happen all at once, it happens a little bit at a time.  If a homebuyer pays 2% more than the last sale, and that keeps happening every month – BINGO – 24% appreciation per year in that neighborhood.

The reason buyers have been willing to pay a little more than the last sale is because it’s frustrating trying to find a suitable house, and if they find one and have to pay a little more to get it, they will,  just to get it over with.  So the 20-30% appreciation per year the last few years can be explained, but will it continue?

Lately, sellers have gotten too optimistic and have been pricing their houses WAY too high, and buyers have collectively said, “Sorry, I’ll live with my frustration rather than pay that ridiculous price.”

Thus, the inventory of homes for sale has grown – why? – because more sellers are unrealistic about what their home is worth. The sellers that get their price right ARE selling because there are still plenty of buyers who want to buy a good home for an attractive price while rates are around 6%, but they aren’t willing to pay 10-20% more than the last sale.

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