Please read my post in the U-T thread, where I describe the disservice the media and DataQuick are doing with the median. Here is a reprint of a portion of it:
The biggest disservice that the media is perpetrating on the public is the pounding out of the median price. While mathematically correct, it does NOT tell the whole story. The + $2mil home market is hot. Those buyers are not affected by interest rates, but by stock market returns. There is weakness in the low end market, because those buyers are sensitive to higher interest rates and rising home prices. This reduction in lower end homes sold and increase in $2 mil and up homes, is skewing the median up. [In reality, each home is worth less today than it was in 2005. Most are priced at 2004 values.-my comment]
Some say that our inventory will shrink this fall, as it usually does, and our market health will return. False. Demand is declining. Inventory is not as important as the demand/supply relationship. The months supply is more important than the inventory number, and the months supply is growing. Inventory will drop in September, but so will demand. The adjusting ARMs have the potential to be a real big deal.
So you see, the median is telling you nothing about the value of each of your rental homes. To find out the value of each of your rentals today, call a realtor. You will fetch 2004 prices, today.
Did you follow Japan’s property bubble? It was even bigger than ours, and people were in a mad rush to buy anything in sight, because they belived there was a land shortage and “everyone wants to buy in Japan”. Their land prices have dropped for 18 years, and are now 50-70% off the highs, and have just recently started turning back up.
Did you read Rich’s bubble primer? What do you think of the graph which shows per capita income/median home price? Do you think that it is possible that prices will NOT correct this time?
I think you also have the same illusion that I suffered for so long: how can prices be falling, when I read that the median is going up? This question sent me on a quest, and I found the answer when I found Bob Casagrand. He explained this all to me. Well, I await your response. I love a good debate, and you raise good questions.
