Is The Housing market going to slow down?
Is The Housing market going to slow down?: This is the question on many people’s minds. The appreciation in the Trivalley alone has been on a steep incline. Just for the sake of information, I pulled numbers for detached homes in San Ramon, over the last 3 years period, analyzing the numbers by the quarter. The number of Sold properties is down by 11 %, simply because the number of homes available for sale are a lot less compared to the last two years.
The Home Values have gone up substantially in San Ramon, averaging a little over 7% per year since 2011 ! There has been a total gain of 23% since Q1 2011 to Q1 2014. Just from March 2012 to March 2014, the average price increase has been 26% !! In some hot sub divisions, prices have increased almost 30%. For the buyers who are in the market now and have been sitting on the fence this is a hard pill to swallow. With the media talking about looming shadow inventory and some real estate websites portraying incorrect inventory data, it has been misleading for consumers. Yet many still question if the gains are realistic… even in my professional opinion, the price increase at the enormity we are seeing is a bit shocking to me too.
The biggest challenge we see is the low inventory. This shortage of homes for sale coupled with the fact that interest rates are still very low compared to the rates back in 2006-2007, this increase will stay on an upward trend. There will be a softening of the market once we see more homes becoming available for sale and the interest rates start creeping upwards. Stabilization of prices is needed, not only in the best interest of buyers but also sellers. Volatility is not good for anyone…. a steady and stable increase sustains for a longer time. We are all witness to the bubble of 2004-2007 and the popping of the bubble was not pretty by any standards. Tech sector gains are fueling sales, mixed with overseas money. With Canada shutting down their EB 5 program, more foreign money is expected to pour into the US.
Viewing all of these numbers in the perspective of Rule 72- which states that any two numbers multiplied together that equal to 72 tells us how long it will take to double in value, anything that you want to measure. The first number represents the compounded rate of annual appreciation, and the second number tells you how many years will it take for your investment to double in value.
Annual Compounded Appreciation rate # of Years Equals 72
1% 72 72
2% 36 72
3% 24 72
4% 18 72
So if we assume a compounded appreciation rate at modest rate of 6%, it will take about 12 years for your investment to double.