Half way through 2010 – how are we doing?
For 2010 so far the average sales price in the greater Grand Rapids area was $112,887, which was up 14% from the average at this time last year of $99,067.
This is great, right? Does this mean the value of my home went up 14%? If you want to skip all the detail numbers, I’ve summarized my conclusions in the last paragraph.
To answer this question I went to look at the reason why the average sales price went up and think about the circumstances surrounding the results.
The number of sales year to date was up over the number of sales for last year, which is good. We can thank the first time homebuyer credit for that I believe. It was up from 5,994 in 2009 to 6,283 – a 4.8% increase. This is the good news. The bad news is that the number of sales for June was 849 for 2010, a 26.2% decrease from the number of homes sold in 2009. This was a bit of a surprise to me because the credit qualifications were for the homes to be under contract by April 30 and closed by June 30. I thought we would see high numbers for June. However, because pending listings are included we saw a dramatic decrease. Things are selling, but everyone that could hustled to be eligible for the credit.
Why did the average sales price go up? I’m a visual person so I’m going to answer that question with a graph:
What I’m trying to show you is how different the sales mix is now compared to 2004-2007. Look at where the graph spikes for those years compared to where it is spiking now. Look at where it is spiking for 2010 compared to where it spiked for 2009. See the graph below where I bolded the percentages of where the most sales lie. Most notable to me is how is 2004 sales under $50,000 made up only 3% of the market and in 2010 it was 25%.
So although 2006, 2007, 2009, and 2010 all have total units sold of just over 11,000, the price range in which these sales occurred have changed pretty significantly.
So – what does all this mean to you? The lower end homes have had the most swings. Some neighborhoods that used to be $80,000 are now $25,000. This has lowered the average sales price significantly from years past. Although most places haven’t seen this kind of reduction, everyone is down from their peak. Everyone. The increase in average sales price from this time last year is, I think, purely because the credit pushed more “regular” buyers to buy in a specific timeframe so the mix of “regular” buyers compared to investors was higher than it otherwise would’ve been. I think this will continue until the amount of foreclosures settles down, and that number has stayed pretty consistent. Unfortunately, an increase in average sales price doesn’t mean that prices have gone up.
With prices this low and rates at 4.25% there has never been a more affordable time to buy a home. Ever. In all of housing history. Go buy a house!!