David Saks: Low Price Could Mean High Gain

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

Low Price Could Mean High Gain



Here's some '07 vs '06 Memphis data under the microscope. Forget the phrase "local market".

With the recent decline in sales fiqures there are some significant increases in the level of sales of lower priced properties.

Here are some Memphis numbers:

Home Price----'06 vs'07 sold  YTD Change

0-19k              64v119        +86%
20-29k            51v43          -16%
30-39k            43v54          +26%
40-49k            38v32           -16%
50-59k            37v49          +32%
60-69k            59v67          +14%
70-79k            58v63          +9%
0-89k              76v39           -47%
0-99k              49v45            -8%
100-119k        111v93           -16%
120-139k        123v118         -4%
140-159k         5v112          +49%
160-179k        94v83            -12%
180-199k        78v67            -14%
200-249k       116v97           -16%
250-299k       110v90           -18%
300-399k        95v75            -21%
400-499k        40v29            -28%
500-749k        29v12            -59%
750-999k         8v3               -63%
1m-& Up          9v2               -78%

data: Memphis Area Association of Realtors

The biggest losers are the categories that start at 160k and up. Median home price levels are down across the board. A local assertion of a 14.8% decline over 06' is an across-the-board decline for the whole year and doesn't place place the data in current queue. How can anyone assert that this is a "short term anomaly" while the market is still tumbling and hybrid loans and pay option arms about to reset?

The biggest gainers are low priced properties, which might be an indication of the strength of the residential purchasing activity of investors who are rapidly capitalizing on the opportunities in the failed subprime market, including the massive acceleration of default and the opportunities to cash-in on foreclosures and short sale opportunities due to a possibility of a favourable combination of circumstances, albeit unfortunate for many homeowners.

Over the long term, is buying a home still one the best investments a consumer can make? I believe that it is.

The "average" sales price for 2006 is being reported as 178.8k while the same figure for "average" sales price 2007 is being reported as 148k. That looks like about -.17226 or a -17% decline in the value of a house for the year ending October, or about a $30.8k (30 thousand 800 dollar) loss in the value of your home in the "average" price range.

What about the "median" sales price for the same month, year to date:

135k for '06 as opposed to 122k for '07. That looks like about a -10% (-.096296) drop in the values of median priced homes equivalent to a 13k, or a 13 thousand dollar loss.

Exisitng inventory is another issue.

David Saks

Time&Temp Memphis

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Comment balloon 0 commentsDavid Saks • March 18 2008 01:38PM


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