New price is a sign of the timesAfter decades of extraordinary inflation, home prices have begun a significant slide as evidenced by a recent survey.
By: Tom Brown: CRS real estate columnist, The Republican Eagle
After decades of extraordinary inflation, home prices have begun a significant slide as evidenced by a recent survey.
According to Standard & Poors/Case-Shiller, home prices in 20 U.S. markets declined 17 percent in May when compared with the same month a year ago.
Meanwhile, home values in Red Wing have declined as well. One sale, for example, scheduled to close later this summer will be sold at a value equal to a deflation rate of about 6 percent per year.
While deflation is discouraging, we do need to acknowledge where we’ve been in terms of inflation. County records reveal the annual rate of inflation of Red Wing homes has averaged 8.6 percent per year since 1994. And that’s just the average.
During several years that inflation rate was stunning with home values inflating an “eye-popping” 15 percent in 2001 and 11 percent the following year.
Average income, however, has not kept pace, which is why we are now in the midst of a correction.
There is little wonder we are seeing signs that read “New Price” or “Price Reduced.” In order to be successful, many sellers are now aggressively pricing their homes in order to attract a limited amount of buyers.
Summary: After decades of home-price inflation, incomes have not kept pace and we are now seeing home prices correct as Sellers deal with a narrow amount of buyers. “New price” banners around town are a sign of the times.
Tom Brown is designated a Certified Residential Specialist by the National Association of Realtors. Brown may be reached at www.tebrown. com.