Wow, Mecklenburg County home prices experienced a 15% jump in February over last year. Considering that the long term historical average for our area is around 3-5%, are we experiencing another bubble? Those of us who experienced the real estate market from 2006 through 2012 may be feeling some Deja vu with feelings of caution starting to surface.
There is no question that 15% home price appreciation is not sustainable long term. But lets take a closer look at some data to find out if we should be worried. Consider that February, the month we are using for comparison, is typically the month where the fewest home sales occur during a calendar year and where prices tend to be at their lowest. The bottom of the market over the past 10 years for home prices occurred in February 2012 when the average home price was $192,000. Contrast that to February 2008 when prices hit $248,000 and then compare to the current average sales price as of February 2015 at $265,135.
This data shows that the average sales price has experienced an 11% average annual increase over the past three years. This type of growth is certainly unsustainable and should be cause for concern. However, the longer term average if we go back to the peak February prices in 2008, we see only a 1% average annual increase over seven years. Most homeowners would be disappointed with this longer term average. Looking back 10 years, the appreciation rate is just over 2%. Market timing is everything. If you bought in 2011 or 2012…congratulations. If you bought at the peak in 2006-2008, thankfully your equity has returned.
This data ought to make those of us that are leery feel a little more comfortable about the pace of the current market. What’s more is that if we look at the number of home sales that occur in a given month, February 2015 home sales are still about 20% lower than the number that closed at the peak in 2006. So clearly the demand is not quite back to where it was during the boom. If it was, I would certainly have more cause for concern.
Admittedly, I am still cautious having lived through the great recession. And I’ll continue to watch the data looking for signs of what’s to come. But given today’s numbers at the start of the spring selling season, it appears that 2015 is going to be a very strong year of sales and price appreciation. Sellers…..enjoy it while it lasts. Buyers…..better take advantage of low rates now because it doesn’t appear that home prices will do anything but rise in the near future.
NOTE: A word of caution for home sellers! Great homes when properly priced sell quickly, meaning days or weeks. Even though the market is hot, home buyers are not willing to overpay to invest in real estate which is why many buyers are still on the fence. Do not over price your home. Be sure to know the data in your area and price according to market!! The consequence of an overpriced home is a listing is no sale and a frustrating selling experience.
For more detail on February’s market stats, check out our website at http://wrealtygroup.com/market/stats/.