As I wrote in a post a couple of days ago, home prices in the Harrisonburg area did not drop significantly in 2008.
When I ask friends and clients how much they think prices have dropped, on average, from 2007 to 2008, the answer is reliably between 10% and 25%. On a $250,000 home, that would be $25,000 to $62,500! They are probably basing this guess on what they have heard and read in the news. Indeed, many cities across America had year-over-year declines in that range.
When I tell them that prices in the Harrisonburg area have dropped less than one-half of one percent — their jaws drop. Often, their next thought is that something must be fishy with the data. For instance, if proportionally fewer homes sold in the lower price ranges, and proportionally more homes sold in the higher price ranges, then that might result in the appearance that the overall average price has been stable. Right?
Let’s see what the data reveals. Below is a table showing a breakdown of the number of sales each year within a particular square footage range, and the corresponding percentage of the total sales that range accounted for. (Square feet means “finished” square feet.)
Square Feet 2008 % 2007 % 0 to 999 66 7.14 77 6.17 1,000 to 1,499 341 36.90 484 38.78 1,500 to 1,999 229 24.78 328 26.28 2,000 to 2,499 132 14.28 175 14.02 2,500 to 2,999 78 8.44 97 7.77 3,000 to 3,999 67 7.25 63 5.05 4,000+ 10 1.08 23 1.84
As you can see, there’s very little change. (Except in the very highest square footage range, but there was a very small population sample for both years in that range.) There were slightly fewer homes sold in a couple of the lower ranges (proportionally), and slightly more in a couple of the higher ranges (proportionally), but not enough to significantly skew the average home price.
Here’s a different way of looking at the data…
Average Finished Square Feet, 2007: 1,762 Average Finished Square Feet, 2008: 1,802 Average Price Per Square Foot, 2007: $127.36 Average Price Per Square Foot, 2008: $123.90
From year to year the average finished square feet went up 2.2%, and the average price per square foot went down 3.14%. These are very small movements.
After this post and the last one, you probably think I’m going to beat the drum and pronounce that now is the time for everyone to buy. Not so — when people ask me if they should buy a home in this market, I answer, “It depends.” I’ll expand on that in my next blog post.