January 1st, 2015 3:11 PM by Joan Rusco
Housing prices have actually shown some decline here in the upper midwest and that is good news. Really? Good news? Yes, and we’ll tell you what the experts are saying.
How could declining home prices be a good thing? First, let’s think back to the early to mid 2000’s. Here in the upper midwest including Minnesota and the Dakotas there was incredible price appreciation. You could buy a home for $150,000, hang on to it for just a few years, sell and pocket thousands. Then came the bursting of the bubble around 2008.
Home buyers who purchased in 2006-2008 saw their home values tank. Buy that home for $150,000 and overnight you were down twenty, thirty, up to 50%. It takes a lot of appreciation to make up for that kind of loss. For example if you bought a $150,000 home and lost 20% of it’s value you’re down to $120,000. Let’s say that same home appreciates 20% (the same amount as your loss). A 20% appreciation on a $120,000 home takes you up to $144,000. You’re still below your starting point of $150,000. We can tell you there are no homes in this area appreciating 20% let alone enough to take you back to your starting point. So back to the original question: how can home depreciation be a good thing?
Finally we’re starting to see some stabilization in home prices. We had some gains in recent years, some modest gains. But we’re not seeing the kind of gains that lead to that bursting bubble. It’s been slow, then it backed off slightly.
Home sales have decreased also. According to the National Association of Realtors chief economist the number of homes being sold has decreased by about half a percent in the last year. That indicates there’s no mad buying pushing prices into bubbleland. The housing market is stabilizing, returning to a modest growth potential of about 5% a year according to some economists.
This moderate growth means current homeowners can see some growth yet home buyers are not going to see such drastic appreciation they are being priced out of the market.
Interest rates remain historically very low and VA loans are still, in our opinion, the best loan program available. If you are a Veteran then we urge you to give us a call at VALoansMN and let us explain all the benefits of the loan program that only you have available. We’ve been doing this a long time and there’s a reason we’re considered the best there is when it comes to VA Lending in the upper midwest. Don’t let this opportunity pass you by….please!