From a reader:
I have another question if I may. We have been wondering how in the world prices can keep going up in a town the size of Cville. Is population growth of people on the upper end of the socioeconoic strata expected to rise that much here?
I merely ask because of the amount of new construction and the current prices well over the $350,000 range for most detached homes. Will we soon be a county full of people with $100,000+ incomes? Also, if I buy a house for $400,000 now can I honestly expect to be able to sell it in 2-5 years for that or more? We are just a bit confused about market dynamics here. They seem really off kilter to us. Thanks again.
First, I love inquisitive people and clients; being questioned and challenged is good mental exercise. Second, this post took much more time than I had initially anticipated.
In response to the above question, the region’s population is growing, as is the nation’s. When we moved to Charlottesville nearly twenty years ago, the house my mother purchased cost approximately $90,000 – an absolutely extraordinary amount of money at the time. In short, taking the $350k purchase price and projecting forward four years, assuming a 5% appreciation rate, one could theoretically expect to sell that same house for $405k. Using the same formula, that $400k house may sell for $463k. Will growth and price appreciation continue? I think so, but the days of expecting 10-20% appreciation year over year are gone. A good indication of where home prices are going will be available 1 March of this year when the OFHEO House Price Index is released.
My prediction: housing prices will continue to rise, albeit at a more reasonable pace. Competition will increase. Buying smart will come into fashion again.
From last November’s HooK:
“In the last several years, people had gotten away from the ‘buying smart’ mentality and were just buying,” he says. “I don’t want it to sound like it’s a scary thing. It’s a really good time to buy, it’s just a very different market.”
Among his tips: if you buy, plan to stay in the house a while.
“Buy smart and hold it for three to five years,” says Duncan. “If you don’t do anything to the house to hurt or improve it, you’ll probably make money when you sell.”
This is a particularly relevant letter to the editor in this week’s WSJ, referencing Japan’s housing price decline:
… This could be one symptom of Japan’s declining population. Japanese Prime Minister Abe even referred to Japan’s failing birthrate in this week’s email to subscribers around the world. This may be the most fundamental indicator of the likely direction of housing prices in the long term.
Albemarle County’s population is growing at an average of 1.8% (source – PDF). The United States’ population is increasing; the birth rate is relatively high, and despite some’s attempts to limit the regional population, we are going to continue to grow, both from within and outside of our region. We cont
caveat: I am not an economist, fortune teller or nor sooth sayer.