Tracking Housing Values Over Time

[HuskyCaucasian]

I am going to try and explain this as best as I can.

 

Over the last few days, my wife and I have toyed with the idea of potentially moving to Orlando within 5 years (more toward 2015). So, just for kicks we started pricing out homes down there to see what we could potentially get. We came across some REALLY impressive houses in our projected price range ($150,000). They seemed... well, too good to be true for me. So, I did a little research. Many of these house were once valued/listed at $270,000-$310,000 around 2003-2007. Prior to that, many of them were similar in price to what they are being listed at currently.

 

So, if I am projecting out housing prices to 2015, what do I do? Do I assume that the 2003-2007 prices were a cause of the our of control housing market and therefor a statistical outlier and assume the 2000 price is more realistic. Or, do I assume that when the market and economy go back up, a good assumption is to find a middle ground in the prices?

 

Yes, I know every market has it's own variables. Just looking for a little help.

[Balta1701]

Orlando (and Florida in general) is another place like Vegas, Phoenix, Riverside, that was ground zero for the housing boom/bust.

 

The Case/Shiller index doesn't explicitly include Orlando as one of the cities it tracks. The graph here might be somewhat similar, and it suggests that much of Orlando has fallen to roughly where it was around 2001, if you include inflation.

 

Long-term, I think the Case-shiller index tells the story correctly...except in bubble times, housing prices pretty much go up with inflation...because if housing prices go up beyond that, the natural economic response is to build more housing to satisfy the demand. If you build more housing when prices have gone up due to a constrained supply, you make more money on building it. In a place like Orlando...it's possible that investment dollars/crazy mortgages drove the market so much that the building industry actually responded by over-building, to the point that it could drive prices even below the normal market trendline before it recovers.

 

Look at the 2001 or so prices, adjust for inflation, and that's probably about where things should be.

[southsider2k5]

I am going to try and explain this as best as I can.

 

Over the last few days, my wife and I have toyed with the idea of potentially moving to Orlando within 5 years (more toward 2015). So, just for kicks we started pricing out homes down there to see what we could potentially get. We came across some REALLY impressive houses in our projected price range ($150,000). They seemed... well, too good to be true for me. So, I did a little research. Many of these house were once valued/listed at $270,000-$310,000 around 2003-2007. Prior to that, many of them were similar in price to what they are being listed at currently.

 

So, if I am projecting out housing prices to 2015, what do I do? Do I assume that the 2003-2007 prices were a cause of the our of control housing market and therefor a statistical outlier and assume the 2000 price is more realistic. Or, do I assume that when the market and economy go back up, a good assumption is to find a middle ground in the prices?

 

Yes, I know every market has it's own variables. Just looking for a little help.

 

If you can figure it out, go here and make a boatload of money.

 

http://www.cmegroup.com/trading/real-estat...r_fact_card.pdf

[HuskyCaucasian]

Orlando (and Florida in general) is another place like Vegas, Phoenix, Riverside, that was ground zero for the housing boom/bust.

....

Look at the 2001 or so prices, adjust for inflation, and that's probably about where things should be.

Thanks for the info. We're REALLY tempted to make the jump now, but I need to get my schooling in first.

[NorthSideSox72]

Thanks for the info. We're REALLY tempted to make the jump now, but I need to get my schooling in first.

Florida was unusually strong boom and bust, as Balta pointed out. But the good news is, there are a LOT of homes to be had for cheap down there now, that are distressed or in foreclosure. Furthermore, FL's population continues to rise. So you may, in the long run, get a good rebound there.

 

But don't expect any house anywhere to make big bucks in just a few years, as they did in the bubble of 2001-2007.

 

Also, something else to keep in mind - one of the few bright spots in real estate has been open land, particularly recreation properties in the south and west. Baby Boomers are retiring and moving to the country, and further, the populations in those areas continue to grow faster than the rest of the country. So that's another path to consider - land is a lot cheaper to buy and cheaper to hold (property taxes) with no home on it. So you could perhaps buy a nice chunk of property for very little money now, and build on it later.

 

[Jenksismyhero]

Florida was unusually strong boom and bust, as Balta pointed out. But the good news is, there are a LOT of homes to be had for cheap down there now, that are distressed or in foreclosure. Furthermore, FL's population continues to rise. So you may, in the long run, get a good rebound there.

 

But don't expect any house anywhere to make big bucks in just a few years, as they did in the bubble of 2001-2007.

 

Also, something else to keep in mind - one of the few bright spots in real estate has been open land, particularly recreation properties in the south and west. Baby Boomers are retiring and moving to the country, and further, the populations in those areas continue to grow faster than the rest of the country. So that's another path to consider - land is a lot cheaper to buy and cheaper to hold (property taxes) with no home on it. So you could perhaps buy a nice chunk of property for very little money now, and build on it later.

 

As someone who is about to buy their first home (a process which was 10 times more frustrating and stressful and full of BS as I thought it would be), I'm incredibly worried about this. Seems to me that the baby boomers are either moving to new places or dying. In 5-10 years there's going to be a massive amount of empty homes out there on the market, and I dunno that there's going to be enough demand to match it.

 

Ugh. So much uncertainty. Thank god Obama will pay off my mortgage if I can't afford it.

[NorthSideSox72]

As someone who is about to buy their first home (a process which was 10 times more frustrating and stressful and full of BS as I thought it would be), I'm incredibly worried about this. Seems to me that the baby boomers are either moving to new places or dying. In 5-10 years there's going to be a massive amount of empty homes out there on the market, and I dunno that there's going to be enough demand to match it.

 

Ugh. So much uncertainty. Thank god Obama will pay off my mortgage if I can't afford it.

Could be. But there are positives to this as well. For one, Baby Boomers retire but still spend money in the economy - that is good for the job market. Another thing, if the boomers to move, they tend to move to the south and west - places where the housing markets got hit hardest. So that could have a nice evening-out effect. The place that won't work well for though, is your suburban family home market, particularly the larger homes in those areas.

 

[Balta1701]

Thanks for the info. We're REALLY tempted to make the jump now, but I need to get my schooling in first.

If you're planning on doing things the right way...which to me is not buying a house as an investment, but is buying a house as a place to live for 20+ years unless you get offered a spectacular job somewhere else...I'm totally serious about this...take a moment and think about climate change as well. Between sea level rise/erosion, storm surges, etc., I'd at least try to make sure I knew something about the elevation of any place I bought, yearly rainfall, probably the type of soil underneath, increasing energy costs, availability/regulation of solar panels, driving distance, method of electricity production, etc.

[lostfan]

Florida's state budget is also a mess because they don't have an income tax, and the combination of a housing bust that caused property taxes to plummet and a recession screwed them pretty good.

[HuskyCaucasian]

Also, something else to keep in mind - one of the few bright spots in real estate has been open land, particularly recreation properties in the south and west. Baby Boomers are retiring and moving to the country, and further, the populations in those areas continue to grow faster than the rest of the country. So that's another path to consider - land is a lot cheaper to buy and cheaper to hold (property taxes) with no home on it. So you could perhaps buy a nice chunk of property for very little money now, and build on it later.

I love the idea of buying land and building later, but i just dont see a situation where we'd be able to afford building anytime in the near future.

 

In 5-10 years there's going to be a massive amount of empty homes out there on the market, and I dunno that there's going to be enough demand to match it.

Well, that's a positive for me. But I think Central Florida will always be a retirement destination, so there will always be at least SOME demand, but they probably did overbuild.

 

If you're planning on doing things the right way...which to me is not buying a house as an investment, but is buying a house as a place to live for 20+ years unless you get offered a spectacular job somewhere else...I'm totally serious about this...take a moment and think about climate change as well. Between sea level rise/erosion, storm surges, etc., I'd at least try to make sure I knew something about the elevation of any place I bought, yearly rainfall, probably the type of soil underneath, increasing energy costs, availability/regulation of solar panels, driving distance, method of electricity production, etc.

That's an interesting angle I had not thought of.

[Balta1701]

I love the idea of buying land and building later, but i just dont see a situation where we'd be able to afford building anytime in the near future.

Well...in terms of a lot of considerations, I'd say costs are likely to go up from here rather than down over time. Energy costs are likely to keep going up, labor costs in the future are probably going to be higher than now because at some point you do expect people to go back to work and hiring someone right now is likely cheaper than later.

Well, that's a positive for me. But I think Central Florida will always be a retirement destination, so there will always be at least SOME demand, but they probably did overbuild.

Unless it winds up under water.

 

That's an interesting angle I had not thought of.

A good first step before buying any place is having an "energy audit" done, at the same time you have a building inspector go through. You can have the basic things checked, like the insulation, windows, what sort of water storage/processing you might be able to set up, learn what the local laws are, see what kind of tax breaks you might qualify for, etc.

 

[HuskyCaucasian]

A good first step before buying any place is having an "energy audit" done, at the same time you have a building inspector go through. You can have the basic things checked, like the insulation, windows, what sort of water storage/processing you might be able to set up, learn what the local laws are, see what kind of tax breaks you might qualify for, etc.

My wife and I have said that no matter where we move... another house in the chicago area, closer to her family in Iowa, or Florida... one of our main upgrade priorities will be "eco-friendly" updates such as solar or wind power, natural water heaters (something my wife saw while in Mexico), stuff like that.

Edited April 26, 2010 by Athomeboy_2000

[Y2HH]

The difference between now and then (as I recently purchased a home and have seen many examples of this while looking for a home to buy), is that a home that cost 300k in 2003-2007 would only go for 300k in that era, not because it was actually worth 300k in terms of size/location/materials/workmanship.

 

These homes that were selling for 300k during the boom, would cost another 50-70k in necessary repairs/upgrades/updates in order to make it worth what that asking price. In other words, you were buying a 220k home and paying 300k, simply because the market dictated that premium, but for no other legitimate reason. After which you would have had to put in another sum of money to bring it up to 'spec'.

 

Fast forward to the present.

 

That same home they were asking 300k for during the boom, which was only worth 220k is now going for 220k during the bust. It still requires those upgrades/updates, but now your total cost ends up being 300k, rather than 300k + repairs/updates.

 

Housing prices haven't really "fallen", they've just come back in line with reality and their actual worth in terms of location, size, and materials.

 

Sanity has returned to what was a totally insane market.

[Y2HH]

A good first step before buying any place is having an "energy audit" done, at the same time you have a building inspector go through. You can have the basic things checked, like the insulation, windows, what sort of water storage/processing you might be able to set up, learn what the local laws are, see what kind of tax breaks you might qualify for, etc.

 

While these steps are nice to talk about, the costs of said services are hundreds of dollars per pop. So if you aren't 99% sure you want to make the buy, having to hire such people every time you want to take a serious look at a house will cost you a lot of extra money.

 

Inspections cost hundreds of dollars.

 

Energy audits cost hundreds more.

 

Add in the cost of the appraisal and you are near 1K.

 

Now if any of these "audits" fails, or doesn't live up to your expectations, and you no longer want the home, you don't get a refund for said services. You just lost that money, and get to look forward to spending it all over again when you find another possible buy.

[NorthSideSox72]

While these steps are nice to talk about, the costs of said services are hundreds of dollars per pop. So if you aren't 99% sure you want to make the buy, having to hire such people every time you want to take a serious look at a house will cost you a lot of extra money.

 

Inspections cost hundreds of dollars.

 

Energy audits cost hundreds more.

 

Add in the cost of the appraisal and you are near 1K.

 

Now if any of these "audits" fails, or doesn't live up to your expectations, and you no longer want the home, you don't get a refund for said services. You just lost that money, and get to look forward to spending it all over again when you find another possible buy.

I'd further suggest that, inspections aside, you can find out many of these things on your own using the interwebs, particularly in the areas of energy availability and infrastructure, flood risk levels, altitude and relative height of land and home location, etc. Better to do as much of that as possible first, AND be 99% sure you are buying, THEN get the inspector in there.

 

[HuskyCaucasian]

I posed the same question to a Disney World message board (I figured people who live there might have a few thoughts as well) and got this little nugget:

"The May 2010 issue of Money Magazine predicts a recovery year of 2031 for Florida. That's getting back to peak prices, though, so it's a little extreme. And pretty broad, covering the whole state, not individual areas.!"