Long Term Appreciation

I saw this chart on Paragon’s website and thought it was terrific. Of course it’s about San Francisco’s market, but it’s pretty much the same numbers here as well. I actually have seen this same chart before that encompassed all the way back to the end of World War 2. Same story, pretty much. Interestingly, this period sort of is the time I personally have been in this business. I started in 1990 right after the earthquake and right before the first Gulf War. It was a recession, but I didn’t realize that…I didn’t have any clients anyway. I was new!

I clearly remember the market heating up in 1995. I had this goofy client who predicted the market’s acceleration because of technology that year. I thought he must have been crazy…but he was right of course. What I really see when I look at this chart is that we had 21 or 22 years of escalating prices out of the last 30. I think it’s very hard to deny that. The little blip this chart calls the dotcom bubble in 2001 didn’t exist at all to me….with the exception of the stalled market following the events of 9/11/01. That lasted for 3 months until January of 2002 when it went off again.

That means that the market slowed a bit in 2007 and early 2008 and then plummeted in September of 2008. It sucked in 2009, rebounded somewhat in 2010, dipped in 2011 and then took off again in 2012. 2009 was really the only market I remember where multiple offers were rare and buyers had nice leverage. The rest of the time it’s been highly competitive for buyers.

I know there’s been tons of ridicule about realtors touting their particular market as being “different” from everybody else and how our values don’t plummet like everybody else’s…but look at this history! Our’s don’t. This brings me back to renting again. Why? The MLS history goes back to 1998…a 4 bedroom 2 bath rancher sold then on Shad for $473,000 (It got multiple offers…it was listed for $450,000!). That same floor plan sold on Marlin this year for $1,300,000. Did anybody who chose to rent over those 16 years earn that kind of appreciation. While doing nothing other than living in a place?

How much do you want to bet that the people who bought Shad in 1998 for $473,000 felt they overpaid…and that the market would fall apart since they just bought. Sort of just like buyers feel right now.

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