Home Prices Have Remained Stabile Since 2005-Why?

I was recently asked, why haven’t home prices appreciated more locally.

Pause...I quickly pulled up my statistics of house sales and found that the average sold price in Montgomery County, PA since January, 2005 is almost the same as January, 2014! June, 2005 was also similar to June, 2014 average sold price, although it was over $25,000 higher. Keep in mind that we have had some wild pricing swings through all of that time period, but basically all of the major house appreciation occurred prior to 2005.

Given years of low, low interest rates, and statistically affordable housing prices, one might expect that prices would have improved. What is holding back the market? It’s easy to point the finger at one problem.

Most recently and repeatedly, many sources cite that the issue is echo boomers or Generation Y or the “millennials” that have largely been unable to enter the housing market due to college debt, perhaps maturing later, and lack of decent paying jobs. I certainly don’t notice a lack of interest in home buying from these buyers, although many are not as handy as prior generations in home maintenance skills (hey, Google how to do home repairs, folks!)

Jobs-unemployment levels, while statistically down, do not reflect the number of people that have given up or are under-employed or underpaid for their experience.

Deal buyers -while only a few years ago the buyers were out in droves looking for short sales and foreclosures, I’m rarely asked about those “opportunities” today. We simply have less of them plus buyers realize what a painfully long and risky process this can be.

New home buyers –there are less of them (and less new homes to pick from), as frankly, you pretty much have to live in the boonies to afford a new house today or pay top dollar for the expense of having everything “new” (yet hardly risk free). After years of having access to our culturally and restaurant rich city and area, many are simply not about to head further out.

Move up buyers-where are they? As families grow, we all need more space. But how many homeowners have gained equity in their homes to buy up right now? How many of these buyers have received raises of any significance? Isn’t it simply harder to save up for the larger down payment needed or preferred to avoid PMI-private mortgage insurance?

Scale down buyers-I recently personally experienced that dilemma. We are used to walk in closets, double vanity sinks, 2-3 car garages, privacy, mature landscaping and a host of other features found in larger homes. The only (affordable) option seems to be attached townhomes or the glorified townhome called the carriage home - a bigger townhome with a larger price tag. Not all are ready for that move.

Could it be mortgage lending standards holding buyers back? Certainly we went from one extreme of ”no doc” loans to practically having to having to cut down a tree with the amount of paperwork and documentation required to get a loan. It’s not easy, but truly many buyers can qualify.

Could it be tougher appraisal standards? I frankly have had very few appraisal issues on homes I’ve sold. Certainly a fair amount of houses are being bought with cash (thanks to the boom in stock market prices) and don’t require appraisals. Buyers are paying what the house is “worth” to them.

What is going to stimulate home prices ? And do house prices NEED to increase?

The factors that make us move haven’t changed-birth, death, divorce, schools, taxes, jobs, job relocation, family needs, health issues.

It all goes back to the basics of economics - supply vs. demand. Other than very brief periods of low supply (this typically seems to happen in late winter/early spring as buyers come out before the sellers are ready), we are pretty much in a balanced market. Until there is a surge of buyers able to buy which exceed supply, we won’t see house appreciation. And that is the market forces in action, which is keeping prices AFFORDABLE. That’s not such a bad thing…is it?

Visit www.ListWithElise.com for more commentary and information on buying and selling today. Elise West Greenberg is a top selling agent in the Montgomery County, PA area and works with Berkshire Hathaway Home Services, Fox & Roach Realtors. She can be reached at 215 378 0684.