February 16, 2009
Does Perception Equal Reality?
I have a dear friend that lives in Cape Coral, FL. He started a new job that will require he and his family to relocate to another part of Florida this spring. I sent him an e-mail a few weeks ago asking if he would be able to get out of his house without taking a bath on it. He said he thought he might, since he bought in 2004 before the big upward swing in values.
After reviewing the most recent statistical data from the NAR, I'm not so sure about that. Cape Coral, FL homes, on average, lost over 50% of their value in the past year. 50%!!! A home that sold for $225K in late 2007 was selling for roughly $110K one year later. That is beyond brutal...that's obscene.
With the exception of a few areas nationwide, I think it's safe to say that the bigger the bubble, the messier the 'pop'. Look at most areas in California, Nevada, Arizona, and Florida. 20% to more than 40% price drops in most areas of those states. These, of course, were the same areas to see double digit annual price appreciation in 2005 and 2006. Conversely, areas that saw more modest appreciation in that same time period saw more modest depreciation last year. The metropolitan area I live in, for instance, only dropped 4.2%.
What the accompanying story doesn't address is the marketing times for all these areas. Even though some areas may not have seen the price drops other areas have, marketing times have increased substantially EVERYWHERE. With distressed/foreclosure sales representing 45% of all sales, I think it's still going to take some time to clear out that inventory and allow prices to stabilize.
The purpose of this blog is to cultivate awareness. I've written many times about how most people feel this real estate fiasco is someone else's problem; that it hasn't hit where they live. Those same people haven't tried selling a house recently, either. Do you still think your hometown is completely insulated from the price depreciation that most of the country is experiencing? Do the numbers from the NAR report support that belief?
Here's hoping everyone's perception and reality are in balance. Make it a great day.
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