The main purpose of this blog is to analyze and publish local real estate statistics that shed some light on what is really going on in the local real estate market.
Recently I took a look at what has happened and is happening to the price of a single family house in Aston Township, Delaware County. Some of what I found may surprise you.
First of all, it is a common belief that home prices hit a peak in 2006 or 2007 and have declined since then. That is generally true, but the magnitude of the change is kind of surprising.
For example, just ten years ago in 2000, the average price of a single family house in Aston Township was $143,602. By 2007, that climbed to and peaked at $268,635. That is an average annual increase of 9.3%, which is high and unsustainable in the long term. The average longer term annual increase in house prices in the United States is about 3%.
The common belief is that that real estate prices have collapsed since then, but is that really true?
Please check out the below (Courtesy of Trend, MLS).
• The re-sale price of an average single family house in Aston increased every year from 2000 through 2007.
• Total increase was 87% from 2000 through 2007.
• In general, house prices doubled in most of Delaware County from 1996 through 2006.
• Since prices peaked at $268,635 in 2007, they came in at $247,725 in 2008, $240,269 in 2009 and $222,497 in 2010.
• That is a decline of 17.2% since the peak. Not fun for a seller, but a long way from the 50% declines that are real in places like Florida and California.
• By way of comparison, a "normal" real estate price correction is in the area of 10-20%.
• Bottom line, Aston Township has seen pretty much of a normal price correction.
Does this mean that we have gone through the decline and that prices are now ready to rebound? Well, probably not, and for these reasons.
It is well established that prices of any item are driven by supply and demand. The result of supply and demand is how much inventory we have.
The more inventory, the weaker the market and the more downward pressure on prices. (Just think of the after Christmas sales or inventory liquidation sales).
If we have less inventory of anything, demand tends to be up (other things being equal) and there will be upward pressure on prices.
In Real Estate, we have the following definitions:
• Seller Market, 1-4 months of inventory, More buyers than sellers and there is upward pressure on prices.
• Balanced Market, 5-6 months of inventory, about an equal number of buyers and sellers and prices are stable.
• Buyers Market, 7 months or more of inventory, more sellers than buyers and there is downward pressure on prices.
Back in the good old days (if you were a seller) of about 2003 through 2007, there were an estimated 2-5 months of inventory in Aston Township. There was upward pressure on prices and they peaked in 2007.
Starting in 2008, inventory levels increased to about 6.8 months. In 2010, there was an estimated 9.9 months of inventory at the end of the year. That exerts a downward pressure on prices.
Stated differently, there is a unsold inventory that has to be worked off before we can expect to see rising prices again. As per the real estate forecasting service at KeepingCurrentMatters.com, we can probably expect to see about one more year of declining prices, followed by a recovery starting sometime in 2012.
Locally, in places like Aston Township, when inventory levels get back to under 4 months, we should be able to see rising prices once again. Until then, it is a great time to buy.
If you would like more specific information about what has happened to house prices in the immediate area around your house, just let me know and I will be glad to develop it for you.
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