Tuesday, August 07, 2012

All That Drama For 1%?

From the Sacramento Bee:

Since 1976, the Sacramento housing market has experienced three distinct booms and busts. Each was longer and more dramatic than the one preceding it, according to a Bee review of data from the Federal Housing Finance Agency.

In the first boom, from 1976 to 1981, inflation-adjusted Sacramento home prices shot up by 37 percent, more than twice the national average, before falling by 15 percent, about the same as the rest of the nation.  In the boom that lasted from 1984 to 1990, home prices rose by 48 percent, after adjusting for inflation, while rising 12 percent nationwide. During the next seven years, Sacramento prices fell by 29 percent, compared to a 5 percent fall nationally.

The most recent boom ran from 1997 to 2006. It was the longest and the most extreme.  Spurred by easy credit and subprime lending, Sacramento home prices soared 135 percent after being adjusted for inflation, compared to a 50 percent increase nationwide. So far during the bust, home prices here have fallen 53 percent. The average drop across the United States has been about 25 percent.
The net result of all the ups and downs: Sacramento home prices grew by just 33 percent during the past 35 years, after adjusting for inflation, for a relatively mundane growth rate of about 1 percent each year.


Boba the IX said...

Wow, 1% a year. Just about the same amount you pay down in principal reduciton on your mortgage the first year!

This is exactly why you never by a house with a payment much higher than rent for a comparable house.

Sure, you get interest deductions from income and principal paydown, but you also have lots of maintenance costs and immobility issues....

husmanen said...

Nice to see a new article on the blog. Been a while.

Then again there hasn't been much new news, same old stuff churning as we bumb along.

I think the 1% is still pretty good compared to the 0.4% Schiller calculated for the US since 1890 and 0.7% from 1940 to 2004.

There is also a study of a home in Amsterday from back to the 1600's that had about the same.

Boba. Like your comparision to rent, that has always been one of my favorites.

Boba the IX said...

I looked at the MLS for Lincoln this morning. Back in 2007 it was difficult to find any homes below $400,000. Fast forward to 2012: Only 33 houses available with asking prices above $400,000.

Boba the IX said...

Here is the curiosity factor for the week: Are people short selling houses to themselves? Rob Wolf with Keller Williams just went pending on 4081 Monteverde in Lincoln for $450,000.

The two neighboring houses, 4041 Monteverde and 3481 Monteverde are both pending for $800,000 and $900,000.

It appears the funny business is still going going in the foothills! If the deal really closes at $400,000 under market value, the FBI and the short sale lender might be interested in getting a call!