John Philip Mason is a residential appraiser with more than 20 years experience and covers the Hudson Valley region of New York. He’s a good friend and a true professional who believes that all appraisers need to have a macro-economic perspective in order to be effective. As a master of the rhetorical question, amazingly I might add, he zeroes in on the pervasive whining by sellers in Solid Masonry. …Jonathan Miller
I’ve about had it with property owners and would-be-sellers who keep complaining about the soft market. Sure inventory and days on market are up; while prices show signs of dropping off just a little. But, you’ve got to admit it’s been one hell of a ride. In just ten years single family homes in our Westchester County market (directly north of New York City) saw the median price indicator soar from $285,000 in 1996 to $675,000 in 2005. (I used 2005 as it is the last full year of market statistics available.) This represented a whopping 138% increase, at a time when many other economic indicators remained unimpressive at best.
Keep in mind that job growth was modest, while wages were flat. Furthermore, several studies indicate there had been a growing number of unreported unemployed and underemployed, and the gap between the “haves” and “have-nots” increased dramatically. These factors are important, as entry-level buyers are typically needed to fuel real estate market growth, by allowing existing homeowners to move up to newer and/or more expensive homes.
Energy prices have softened lately, but more than doubled over the same ten year period. Meanwhile, increases in real estate taxes became a sore point for many, with some school districts required to raise tax rates at 2-3 times the rate of inflation, due to a growing list of federal and state laws, increased student enrollment, and wage and benefit increases. All while the real estate frenzy pushed the price of construction materials and labor to unimaginable levels, as increasing demand for limited resources allowed suppliers and skilled tradesman to name their price. In other words, home prices rose despite downward pressure from increased costs in home ownership. And before you start shouting about interest rates on mortgages, keep in mind they dropped only about 20% during the same ten years.
As I’ve noted before on Soapbox, I don’t think of a home as an investment, but it’s worth noting that the equity market indicators have also lagged the nation’s real estate market. (However, the leading indicators have done far better than most might think.) From the close of 1996 to the end of 2005, the Dow Jones Industrial Average, the NASDAQ Composite Index and Standard and Poor’s 500 all climbed an average of about 90%.
And speaking of stocks, let’s say you bought a position at $25 per share, and over ten years it climbed 138% to $59.50, followed by a recent 5% decline to $56.50. Would you lament over the stock now having dropped 5% or would you celebrate your position still being up over 125%? This isn’t even a question of whether the glass is half full or half empty. It’s an over-flowing glass minus a couple of sips. So sellers and owners please stop whining. Because isn’t 95% of amazing still amazing?