"The Sky is Falling"
I’ve added quotation marks here as this is the type of headline we see or hear all too often these days. While there’s certainly no doubt the markets in many areas have major problems right now, broad generalizations in the media leave little if any room for the public to understand the distinctions that really do exist. The “news” by its nature is what’s happening now yet when it applies to already fragile mind-sets, it can incite further fear and self-fulfilling prophecy. We hear about the Case-Shiller Index repeatedly, yet rarely is it spelled out that this is applicable to only 20 Metro areas. Last I checked, there were almost 400 of those in this country…
So let’s take just a moment and dig a little deeper using the most recent quarterly update from OFHEO/FHFA which is a much broader measure that reflects every state and metro area:
Declines in property values YTD (through the 3rd Qtr. 2008) are prevalent, yet there are only 4 states that saw double digit declines and 9 that have actually appreciated in value (open link below to see the chart).
Since typical ownership terms run from 5 to 15 years, the short term market moves should be less important anyway. If we look at the last 5 years running, only one state has seen a decline (MI) and even here, this has more to do with the areas that have supported manufacturing. Other areas in the state are doing better as industries like medicine are growing quickly.
For all other states, total appreciation ranges from 5% in Ohio to a high of 75% in Hawaii. It’s most interesting to note that even some of the most recently hard hit states such as Arizona, still have average annual double digit appreciation over the last 5 years.
The take away here is to know your market and how it relates to what your customers are hearing on the news. Times of great fear have historically been the best time to buy. With historically low rates, lower prices and at least for the 92.4% of the workforce that is still employed, affordability is at an all time high. No one knows exactly what will happen in the future yet history is irrefutable and makes for a pretty solid case.
Link to state by state chart & figures here: http://www.homeeconomicschart.com/quarterly%20update%20flyer%20b%20larrabee.pdf