Yes, I believe that average and median sales prices will go a lot higher over the next few years. This is a very important concept I think you may want to take the time to read:
I think that the housing market topped in the fall of 2005, viewed both nationally and specifically to bubbly markets such as San Diego. However, the slowdown will not affect all markets evenly and this will have unusual effects on the statistical data. Namely, I expect aggregate average and median sale prices will be skewed upward for a while yet, probably substantially.
I expect that the average and median prices will continue to surge upward at close to 10% for another year or two.
This may be a little counterintuitive to people like me who have been expecting a housing slowdown for years, but this is a simple mathematical concept: Downturns usually start at the bottom of the market and work their way up. This particular slowdown in San Diego is playing out the same way. As the lower end of the market sits, waiting for a sale, only the higher end sale prices are calculated in the averages. Thus, the collapsing sales market translates into increasing median prices.
This has probably been occurring to some extent for a while, but the statistical up-trend is not completely done with regard to housing prices. Keep an eye on sale volume, days on market, and prices in individual, smaller markets for a more accurate look at the health of your market. As crazy as the market has been, until recently we had the sales volume to support the growing sales prices. I expect most media sources will focus nearly solely on the increasing median prices into the near future.
I am not saying that there will not be price reductions; I am merely saying that the price reductions will not be visible in the median data for a lot longer than many people think.
Thanks Poway, I didn’t realize that this had been discussed and at such length.
I read Bob’s article a few weeks ago but didn’t give it much thought. Last night I had what I thought was an epiphany, and it suddenly made sense how the median could keep going up. Upon re-reading Bob’s article, it now occurs to me that I am just reiterating his message in a clumsier language.
I do not believe that will occur, although the logic does seem to make sense. It will take a substantial rise from here for that to happen, at last check the year over year numbers are under 6% and this is the prime season. If this type of thing was playing out, I think the median price would be rising alot more right now.
Of course, the median price is really not worth that much in fully assessing the market anyway and it’s health or lack thereof.
The only thing I see on the horizon that makes me question whether a big drop is at hand or not is that so many people are talking about it, and the herd is usually wrong at the turns. This is just my futures trading background talking in my “inner monologue” kinda like Austin Powers. Oh, did I say that out loud?
It is happening: median price is slightly up, although each individual house is worth 5-10% less than last summer.
Yes, many people are talking about it, but check the newest topic Rich has on the main site. We’ve discussed that the word bubble, as used by the masses and the media, is thought by those groups to mean a slight pullback, followed by a small rise or even plateau of prices. The number of people who believe in the true bubble, a letting out of all their air of speculation, is probably less than 1/2% of the population. Look at how few of us are on this board! We are the forerunners in knowing about this housing bubble, and the recession.
Don’t even think that the bubble idea is widespread and accepted. It is not.
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