The median price of houses in the Vero Beach Florida – Indian River County area decreased 14% from $137,000 in June to $120,000 in July. There was also a 12% reduction from July 2010. This figure is equal to the lowest median price in the last 5 years, which occurred in January 2011. 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 dropped off substantially this month. Because the median has stayed fairly constant and the number of higher-priced sales have decreased, it is reasonable to say that we are at or close to the bottom of the slide in values. We believe that the decline of prices is at or near bottom, and that this low median price indicates a tend that buyers are moving to lower priced homes.
The turnaround is probably close, and when prices do start to increase, we should 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 a response to over-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 costs
It is entirely possible that once the economy and real estate market recover, we will see a “recapturing of equity” that will be reflected by higher than normal appreciation that will occur until housings prices recover based on historical appreciation.
