A few weeks ago, my home was re-assessed. The county in which I live, with its wonderful, high, real estate tax rate, came slithering around to see what the value of my abode was now that I added a new garbage can.
Sure enough, they found that I deserved a considerably higher rate. Needless to say, my wife was ecstatic that "her" home (as she calls it) was worth more than a year ago. So, does this mean that the elevator ride upwards continues?
Take a look at some recent stats from the federal government. For one, the average home in the U.S. actually gained in market value by 9.4 percent in the past year. For that matter, average gains in 74 metropolitan housing markets actually doubled over the past 12 months. In fact, 10 markets realized more than a 20 percent gain with Las Vegas hitting the heights at 25 percent. Figures. That's where my colleague Howard rests his money.
Actually, not a single metropolitan housing market had a net loss last year and only Texas and Utah had a small decrease. Some areas such as the South, Midwest, and mountain states had gains greater than even the national average--around six percent.
So, if you boil all of this down, what does it mean?
Well, look at Rhode Island where home values rose by 88 percent in 60 months or California with 84 percent or Massachusetts with 74 percent. The question that begs the house here is can buyers still afford to pay what are deemed inflated prices?
First of all, many of the markets that have witnessed the biggest gains have extraordinarily solid employment bases with unemployment well below the national average. This means that income is above that national average. One expert in this area says that repeat buyers usually have equity positions which they can work tax-free in order to buy such houses that have been inflated. I hope they are still around when and if I decide to sell.
Next, consider the fact that interest rates have been exceedingly low. For that matter, they have been below six percent for a heck of a time now. As a result, such low cost mortgage money then affords buyers to look at even larger mortgages, thereby paying higher prices for such homes. My father used to advise young people to let the government pay for it as much as possible.
As to interest rates, they are certainly going to increase. They can't stay this low forever. What this will mean is that buyers won't be dancing like they are now or have been over the past year. They'll simply lower the pots a bit. Bring down the level. And, I don't really expect to see any appreciable drop in prices. Keep in mind that when it comes to buying or selling a house, there is always a top for every pot.
