Home prices off a bit from spring
Home prices have edged down a bit, retreating from near record-highs reached this spring and early summer.
The National Association of Realtors says the median selling price for all types of single-family homes was $224,900 during July, August and September.
But that's only $2,600 less than the $227,500 median price this spring (April, May and June) -- which nearly matched the all-time high of $227,600 reached during the summer of 2005.
It's also higher than last winter. Prices slumped to $217,900 in the first three months of the year before recovering in the spring.
So while home values may be slipping, they're certainly not collapsing. In fact, the Realtors still expect median prices to increase about 1.9% this year and 1.7% in 2007.
While that's not the double-digit appreciation homeowners have come to expect, it shows homes are retaining the value they've gained over the past decade. The median price has grown more than 110% over the past 11 years, and remains more than 25% higher than in 2003.
Moody's Economy.com Inc., a research firm in West Chester, Pa., caused a stir with recent projections that median prices are likely to fall in more than 100 cities over the next several years, with 20 metro areas experiencing a decline of 10% or more.
That was one of the more dire reports we've seen and even it expects homes prices, which have more than doubled, remember to give up only a few percentage points of their value.
It's not inconceivable that home prices could fall slightly over the next several years. We were worried that such a trend was developing when prices declined for two quarters last winter.
Everyone recognizes that a wave of foreclosures caused by reckless lending to declining wages and layoffs, to a slowing economy and possible recession could hurt home prices in many cities.
When we analyzed the Realtor's data for July, August and September (the third quarter) we found the median sales price rose in 106 of the of the 149 metropolitan areas surveyed. This was fewer than the April-May-June survey that showed increased prices in 130 of 147 cities.
The steepest declines occurred in areas that had shown huge swells in appreciation over the past few years, such as New England, especially Boston, and many regions of Florida.
In Sarasota, for example, the median price declined 9.4%, but was still $320,700 up almost 66% from the average median price in 2003.
In most of the other cities suffering significant downturns, it appeared local economic problems hurt home prices. Although Detroit led with a 10.5% decline, Ohio was the hardest hit with seven of its surveyed cities showing declines in median prices.
But these cities were clearly the exception. There were 22 cities that showed increases of 12% or more last summer. The biggest gains were found in the Mid-Atlantic states and in the Northwest, with Washington and Oregon showing exceptional strength. Increases in median prices also showed up in Gulf Coast cities of Baton Rouge, La., Beaumont, Tex. and Gulfport, Miss. those rebuilding after Hurricane Katrina.
The Chicago area provides a good example of what's happened in the great majority of cities. Prices had peaked at $274,700 in July, August and September of 2005. They fell to $263,600 the first three months of 2006 but returned to $278,500 the second three months of the year, which was a new record until the latest survey showed another small increase to $279,400.
Only 42 metro areas reported lower prices than in the summer of 2005. Prices in 30 of those cities were down less than 5%, and out of those 30, 13 lost 2% or less.
What does all this mean if you're buying or selling a home?
The market is tilting a little towards the buyer.
There too many unsold houses on the market -- about a third more than this time last fall. The typical home is taking longer to sell and fetching a little less than it did in the summer of '05 when sales and prices were setting new records.
Buyers can make the most of that by not falling in love with a single "must have" home. Find several you like and be willing to move on if the first owner you approach won't accept your offer.
The other good news is that mortgage rates have fallen more almost three-quarters of a point since peaking in late June. When you look back at how much mortgages cost over the past 10 or 20 years, rates are quite reasonable and we think they'll remain that way through the end of the year and into the first couple of months of 2007.
The key is to know exactly what's happening with prices in the community where you are buying. Find out what comparable houses sold for last summer and are going for right now, then bargain accordingly.
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