http://www.courant.com/business/realestate/hc-homesales0829.artaug29,0,7234560.story

Click on the "Related Links" Decline in the House Graphic.

I think this graphic is useful in showing the relatively modest decline in CT housing prices in the last year relative to the 7 years of amazing growth (58.6%) that preceded it.

One might project (i.e. guess) that a plateau in this chart could develop around $260,000 during 2009 before we return to the modest 3.5% growth rate in 2010 similar to that we enjoyed in the year 2000 and then the whole 10 year cycle begins again.

But we must hasten to point out that if someone bought a median priced home in 2000 for $170,000 and they used a 10% deposit ($17,000). Their house would have grown to be valued to about $288,000 by 2007. (Little Side note: We bought ours for $180,000 in 1998 and got an appraisal of $360,000 in 2007). So the increase in equity during those seven years on the median priced house is a whopping $118,000. So their initial $17,000 investment grew to $118,000 in seven years which is 694% or almost 100% each of the seven years.

Here is how the annual increase looks in a spreadsheet:



Median Price
$170,000 The year 2000 Price
$12,750 (yearly increase)
$182,750 The year 2001 Price
$13,706 (yearly increase)
$196,456 The year 2002 Price
$14,734 etc.
$211,190
$15,839
$227,030
$17,027
$244,057
$18,304
$262,361
$19,677
$282,038 The year 2007 Price

Notice that the compounding effect of this 90% leveraged position allowed the homeowner to get an average of about 100% return ($17,000) on their initial investment each and every year for the seven years of expansion.

The key to having a great investment is being invested in the house during the period of expansion which may not be as easy to determine in advance. So the advice would be to buy and hold real estate to take advantage of these surges when they take place realizing that during a typical 10 year time horizon you will do just fine.

OIL-RICH FUND EYEING FORECLOSED US HOMES

This interesting article is very believable. This would be one more sign that the market is getting ready for a transition. When we read ... "Hanson is now willing to pay 50 cents to 60 cents on the dollar for a collection of California REOs worth at least $500 million " we may be reaching the bottom of the market.


http://www.nypost.com/seven/08102008/business/lost_sovereignity_123879.htm