That's no Bubble, That's My Life (analysis, part 3)

First Time Home Buyer, Market Analysis, Tips

That’s no Bubble, That’s My Life (analysis, part 3)

Last week, I promised to show you the real kicker. Here it is: Non distressed homes are taking on a greater role in the market. The distressed houses are going away.

What did the line look like for non-distressed homes? These are people who didn’t necessarily lose their home but their values went down. Watch what happens here, ‘cause this is the real kicker that reveals why it is we’re not in a bubble.

This chart is for Maricopa County, Median Home Sale Prices: NON-DISTRESSED SALES ONLY

The red arrow indicates the 18% pricing increase in the bubble. This was bubble-pricing at the beginning of the bubble. The large red circle that follows is what a real bubble looks like.

Now look at where we are now in this next chart. Look at the matching 16% increase at the far right of the chart, marked in blue.

We’re just matching the increase of Q4 2003-2004! Ask yourself:

What did it take to get us to where we were at the outset of the bubble? Recall those three big components from my part 2 analysis, last week. Are those at play here in the market again?

No.

We don’t have 100% financing.
We don’t have mortgage cash backs.
We don’t have schemes.

People have to have money. You have to 3.5% down, minimum for FHA. The conditions before are not the same now:

Mortgage lenders have to go to class and get licensed, just like agents now. Lenders didn’t have to do that before. You have to have some skin in the game nowadays, but you didn’t really have to have that back then. We’re not seeing those kinds of things. So for normal home prices, that dashed light blue line in the chart above, we’re right on the normal.

The normal home sellers and buyers are just kind of hanging out. When you look at what the prices are today

(~ $200,000 – per the number of the far right side of the above chart) and then look back into the past at the last time we were at that point, in the fourth quarter of 2004 (~ $193,950), you start to see what your equity is.

In the graph above, if you bought your home in the green box on the left, 2001 to late 2004, you had equity. If you bought it in the box on the right, late 2009 to now, you have equity. Now’s the time to sell.