The Associated Press recently came out with an article that basically said that $1 million dollars is going a lot further when it comes to buying homes these days. Even so, sales of homes over $1 million are down by more than 50% from four years ago. For people who have that kind of money and are searching in that range, now is the time to buy. Though that's interesting, most of us aren't trying to purchase or sell million dollar homes.
But the article did talk briefly about how during the housing boom, median real estate prices increased so much, so fast and homes were in such high demand that median prices skyrocketed. The article gave the example of Santa Clara, Calif. having a median price that hit $836,780 in 2007.
That does apply to the average buyer. Many potential first time home buyers, and even "move up" buyers" were priced out of the market before they even started their search for a new home. The figures inspired a search to find a similar median sale price statistic for Twin Cities real estate. It was truly an eye opener. Here are the introductory paragraphs to the article:
Home sale prices dipped in 2007 for the first time in at least 20 years and are expected to remain flat or fall slightly in the coming year, officials from several Twin Cities-area real estate groups said Wednesday.
The decline is bad news for anyone trying to sell a house and also is an indication of downward pressure on housing prices across the metro area -- sobering news for anyone who bought at the peak of the market or has borrowed heavily against the value of their house.
Between foreclosures and the mortgage crisis, we now know how much this of an understatement this might have been. Now its a buyers' market and not only is a million dollars going further, lower prices are buying a lot more house for the average person these days.
A prime example was offered as the article went on to quote statistics from the Minneapolis Area Association of Realtors showing the median sales price of all homes sold in 2006 was $230,000. According to the same organization, that figure had dropped to $154,125 in March 2009 and has just recently risen to $175,000 in August 2009.
As the deadline for the federal tax credit creeps closer, its less likely for people to be able to sign on their homes on or before October 31 and qualify. There has already been reports of drop-offs in foot traffic at homes and model houses. At the same time, the traditional selling season is winding down. Finally and unfortunately, there is still a big problem in Minnesota with foreclosures.
The bottom line: Prices for homes will be unpredictable in the coming months, but will likely go down. The federal tax credit will likely be extended, which may keep them level. Either way, it still may not be safe to sit on the fence. Though real estate prices are likely to remain on the low side for a while, interest rates may not.