The median price of houses in Indian River County area increased 3% from $120,000 in July to $124,000 in August. However, the median sales price was down 13% from August 2010. Remember that the median price change does not necessarily mean that the value of an individual house has increased or decreased. The median can be influenced by the number of high or low priced homes sold in a certain period. As noted by the sales in all categories, the number of medium and high priced houses that sold is still low compared to last winter and spring. We are not ready to positively say that the bottom has been reached but it is reasonable to consider that we are at or close to the bottom.
We expect that the turnaround is potentially close, and when prices do start to increase, we should in the near term see a higher than normal appreciation. According to the National Association of Realtors, “the typical appreciation for homes in the United States has averaged around 5% per year.” According to The Case-Shiller Index, prices this year have dropped back to 2002 levels. This overcorrection of prices, is assumed to be an over-response to wild appreciation during the housing bubble years of 2004-2007.
Had it not been for the housing bubble, prices would have likely continued their 5% annual appreciation levels. Given a variety of indicators that include:
- Population increases
- Low level of construction starts
- New construction cost
It is entirely possible we will see a “recapturing of equity” that will be reflected by higher than normal appreciation over the next 3 to 4 years.
Low interest rates can make a big difference in the affordability of a home. In 2000, interest rates were at 7.9 %. Now they are under 5%. This equates to a reduction in monthly payments for a $200,000 home purchased now of approximately $395 per month ($4700 per year) over 2000. As interest rates increase, the purchase price of the home you can afford is reduced. In other words, if you wait to buy a home, you may have to settle for your second choice FOREVER.
