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Jan. 5, 2011 - 2011 Home Prices - Prices UP? Prices DOWN?

Will Home Prices in 2011 be going UP or DOWN? If you are a house-geek like me, you have spent untold hours in the last three days working through volumes of data to pinpoint where we have been and where we are heading.

First the scary news. People are overpaying for houses...again. I don't mean prices are UP. I mean people are simply OVER-paying for houses AGAIN! Which also means some appraisers, even with the new stricter guidelines, are allowing that to happen. The bright side for people who aren't buying houses is that most of those people stand to lose their own money, given the over-payers all have a substantial down payment.

That also tells us that the appraisers are a lot more careful when it is the Bank's money at risk, than when it is the buyer's money at risk. We have pretty much always known that...but "we" are the house-geeks, and apparently NOT the average buyer of a home.

This is seriously appalling. Let's look at what I'm talking about. Keep your eye on the Purple...and then move to the next chart.

I have color coded the prices to show home buying decisions ranked from "really great deal" to "OMG, who paid THAT!"  Smack in the middle of "great deal" lighter GREEN and "OMG bad deal" RED, is PURPLE. Look at the charts below.

Purple deals were the norm at PEAK in Summer of 2007 and even Summer of 2008. But by August of 2008, PURPLE deals disappeared. People were doing their homework and being cautious all the way from August of 2008 until...wait for it...March of 2010?!?! 

I first ran into this a couple of days ago when I wrote "Are You Over-Paying For A House." which was about overlooking the misappropriation of square footage and other value factors like Land Value vs Value of the Structure. But when I saw people paying 1.36 X CURRENT Assessed Value, something I had not seen since Summer of 2008, it sent me on a two day study of every piece of data I could get my hands on! Talk about "Stop the Madness!"

The really cool thing about the housing market is there's always one person who can get a super deal when no one else is. That's why you see a couple of GREEN decisions in 2006, and even one at PEAK in Summer of 2007. You also have a handful of people in RED that paid "OMG you better die in that house" price. Every market offers a chance for someone to outsmart it, and for some people to get totally buried in it. 

But please, please don't be buying into the "Now Is a Great Time to Buy!" nonsense, as if you don't have to know which house is selling at a great or at least fair price, and which ones are overpriced. I will write more about that in a post over on Rain City Guide in a week or so, as it involves further study of the first chart. I also want to capture all of the end of December closings. But first let's look at where we REALLY are right now, as it is HUGELY different than the 24/7 Newscycle Hype would lead you to believe. 

The Chart above gives you THREE YEARS worth of where we have been.

The Chart below shows you that my Bottom Call that made Front Page News in early 2009, is still holding. Even though during the whole time since that time you have read horror story after horror story about diving home prices and foreclosures and Double Dips ad nauseum...well, look at the numbers. Not a freakin' darned thing has happened since I called the market slide STOP in early 2009. EXCEPT some people apparently listened to the frenzied stories, and assumed that they were getting a great deal, when they were in fact getting a deal so bad, that no one had done it for almost TWO YEARS!

Be Careful Out There. EVERY house for sale is NOT a great deal!

Review: Above in the RED BLOCK is my Bottom Call. Home Prices Have NOT been LOWER since, contrary to popular news stories by Journalists who don't help people buy or sell houses for a living. Also contrary to the Bubble Blog that waits for the market to go UP by 5% so it can call a WHOPPING 2% "double dip decline"! Seriously...don't be running out thinking there is some huge landslide in hope home prices across the board. Look at the numbers...the facts simply do not support that.

The chart below is simply the monthly numbers from above so you can see in a single line format where home prices have been for THREE YEARS. I know, you saw some Whopping Decline Chart somewhere that made you think prices were so low that they ALL represented some kind of Super Deal.

Sorry...that's like a guy on a date with a magnifying glass in his pocket...things are not as LARGE as they appear! Nothing to get so overly excited about and run out and OVER PAY for!

To drive this point HOME better...LOOK AT THE TWO YEARS IN THE CHART BELOW. Does that look like some Double Dipping, Foreclosure Driven, Frenzied DOWN hill Price Slide to YOU!?!? It looks mighty FLAT as a pancake to me!

Back to the original question, are home prices going to go down? Yes. But after going through all of the data since I wrote my thoughts about the market decline back on June 22nd, I see no change in my position. We're probably looking at 5% down before we head into Spring Bump when it will come back up and over "bottom".

When we got to $1,000 over "bottom" in October, I thought I had undershot the decline of 5% in the 4th Quarter. I really did. Super Funny that Dec 29th articles are only now reporting what I said on October 26th! Talk about a lag time.

When the market took the full amount of my expected 4th Quarter hit in October, I was prepared to be wrong about that 5% down call for the 4th quarter. But...the market popped back in November and December to make the 5% call "spot on". Prices went from $395,000 3Q to $375,000 4Q (see quarterly graph picture third down above), exactly 5% and still above the March 2009 "bottom".

January should be lower by up to $10,000 or so. 1st Quarter 2011 should be lower than 4th Quarter 2010. But only if people pay closer attention...and stop buying in that PURPLE Zone!

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Required Disclosure - Stats in the post are not compiled, verified or posted by The Northwest Multiple Listing Service.

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Jan. 11, 2011 - RE: 2011 Home Prices - Prices UP? Prices DOWN?

Posted by David Stricker

I have looked at sales in one of the markets I frequent, 98027, and have found there are a vast majority of properties selling in the purple or higher in the OMG zone.  This leads me to wonder if either the AV for the area is way low or if the buyers are somehow, as a large majority, this wrong.

Consequently in another adjacent search area, 98038, I find exactly the opposite to be true where most would fall in black or green zones.

Is this latter area on the slide or is the first area full of misinformed buyers?

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Sep. 22, 2011 - RE: 2011 Home Prices - Prices UP? Prices DOWN?

Posted by ARDELL DellaLoggia

 David,

Two words. School District.

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ARDELL DellaLoggia of Sound Realty on Seattle Real Estate process and market including Kirkland, Bellevue, Redmond, Green Lake and most areas around the top of Lake Washington North of Downtown Seattle. Phone: 206-910-1000 - Mailto:ARDELLd@gmail.com

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