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my house value has beat inflation over the last 10yrs. so i am a winner? so much for averages.
A house isn't any different than anything else, it's worth its replacement cost, minus depreciation, which is what starts to occur as soon as the builder hands the keys to the new owner. The idea that houses should keep increasing in worth was always a mistake. But for every mortgage that was or is underwater, some seller got the money. We don't hear anything about those astute/lucky individuals.
My analysis of the Minneapolis housing market suggests that it is still vastly overvalued and has a LONG way to fall. A typical Minneapolis house having a pre-boom (1999) city market valuation of $95,000 is today valued at well over $200,000, having dropped only about 25% from its most irrational boom peak, while its inflation-adjusted pre-boom price would warrant only a $150,000 valuation (that would be about a 50% drop from the peak).
Why the enormous difference in the current valuation vs. the adjusted pre-boom valuation? I can't imagine. Maybe a glut of foreclosures being held off the market by banks? Unless Minneapolis has something special going that the rest of the country is missing, prices here are going to crash enormously. In Chicago for exmample (which admittedly has twice the per-capita foreclosure rate of the Twin Cities), houses have generally already fallen well below their inflation-adjusted pre-boom prices. (They never peaked as insanely as they did here, so it is meaningless to compare percentage drops.) If the same trend is underway here, that typical Minneaplolis house now valued at over $200K will drop to maybe $125K. Buy a house now in Minneapolis? Buyer beware. I myself (new to the area) will be renting for the forseeable future.
I am trying to sell a house and buy a house in a SW suburb. Sometimes I wonder whether all of this negative/factual talk of the current housing market really matters...at least to me. I don't care what my present house value is as long as the same relative value factor affects all housing, especially the house I want to buy. It still comes down to what can be afforded. My message to those who are looking at my house...make an offer. The days of "contingencies" seem to be over but that is exactly what we seem to be needed. Once we know what someone will accept for their house, then we can make adjustments to the price of our house. If someone makes an offer for our house, we have 14 days to accept it (find a house to buy and finalize an offer). That's our contingency. We are ready to buy today (and have three houses on the short list) if an offer would be made on our house. We are now monitoring what appears to be a "dutch auction" based market....systematic lowering the price until it makes a buyer think they better buy it before someone else does. (We were interested in a house that sold almost the same week it was listed! Good value to someone!) We expect the same thing is happening to the house we want to buy. The dollar differential is expected to be the same whether a healthy market or not! Now is the time to buy! 4.5% rates....low prices....numerous properties. There are plenty of good options available today....at the right price. Make an offer that works for you and find out! That's the bottom...and there are possibilities.
Although the current state of the housing market is hard news to swallow, the fact is that this needs to happen for the market to start on the road to recovery. Once we finally see the end of price declines the housing market can start a slow but steady improvement which is something every homeowner in the country is looking forward to. For sellers out there trying to sell for sale by owner a great way to promote their home is on www.signaturelistings.com. Here anyone can list their home for sale for free ... every bit of free advertising helps! Plus here you can find some helpful information about renting vs. buying. Looking forward to finally hitting the bottom so we can start moving forward.
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Minneapolis, MN 55488
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