The next thing to consider in a housing recovery are home values. How much have they fallen, and may continue to fall? Also, are we seeing any appreciation? Most people don’t want to buy a home if they think the value will drop in the near future.
Between 2010 and 2011, median home prices in North Seattle fell about 5.15%. The west side of the freeway (Ballard, Wallingford, Green Lake, etc.) did a bit better, only losing 3.9%. The east side of I-5 (Ravenna, Bryant, Maple Leaf, etc.) added more to the overall drop, by falling 6.4%.
A fall in values generally DOES NOT signal a recovery in the housing market. However, it is important to take this analysis a step further to see how values affect the bigger picture. Since the crash of 2008, we have seen an overall decrease in home values of nearly 24% in the Greater Seattle area (http://www.forecast-chart.com/estate-real-seattle.html). Some areas have definitely done better than others, but regardless we have seen mortgage payments become much more affordable over the last four years.
If values continue to drop, and interest rates also stay low (we’re currently at an all time historical low of about 4%), overall mortgage payments will obviously decrease as well. We are already seeing this situation occur in many neighborhoods including North Seattle, where it costs almost the same on a monthly basis to own a home as it does to rent a similar property.
If prices continue to fall, we will get to a point where it’s actually LESS EXPENSIVE to own, than to rent. This is typically a benchmark where housing markets start to recover, which is partially why many experts argue that we are already at the bottom. That being said, there is no definitive guarantee that housing values will not fall another few ticks south. If you are planning to live in the home long term, a small loss in value in the short term will probably not affect you overall. But if you only plan to own the home for a short period of time, a few percent decrease in value could be catastrophic, and you may want to reconsider purchasing a home.
Again, this is only one of the factors to consider when buying a home. There are many angles to consider. If you’re looking to gather more information before making a decision, go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.
