Home Sellers still have nice returns despite price drops

by Coldwell Banker Evergreen Olympic Realty, Inc. on November 20, 2008

With all the reporting of falling home prices, there is one fact I have yet to see reported (a fact we have been discussing all year): these large drops in prices do not mean that everyone in those markets is losing money.

You will recall that in the hardest hit markets, prices were escalating at twice the national and historic averages. From 2001-2006, prices around the rest of the nation increased 47 percent. In many parts of California, Nevada, Arizona and Florida, price gains ranged from 89-109 percent. So even with 30-40 percent drops in prices over the past 18 months, the long term trend is still up.

Recall our example in last quarter’s Quarterly Report:

Over the hot seller’s market from 2001-2006, prices escalated nearly 89 percent in Las Vegas. That is nearly double the national average of 47 percent. That means a $300,000 home purchased in 2001 would have sold for $567,000 in 2006. Even with the 15 percent drop in prices in Las Vegas, that home is now selling for almost $482,000, a 61 percent gain since 2001. So even with large downturns, the longer trend is still positive.

With all the price corrections that have occurred in Las Vegas, the net result is that average annual gains are about 4 percent since 2001. That number is much closer to a 5-6 percent norm than the 15+ percent annual growth they were experiencing from 2002-2006.

Despite the price drops here, we are seeing the vast majority of home owners still achieve returns. Even if we drop another 5-8 percent over the next five months, which is the road map California, Arizona, and Nevada have shown us, most sellers will still be seeing positive results -which includes buying a more affordable next home.

Statistics compiled by Coldwell Banker Evergreen Olympic Realty, Inc. from the NWMLS database. Statistics not compiled or published by NWMLS.

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