Ask Dave


Dear Dave,
Last weekend’s paper contained an article which stated that home prices nationwide have risen 11.9 percent in the past 12 months. During interviews with various Realtors who we know and trust, some of whom gave us proposals last year, they have made claims that housing in this area have only gone up a few percentage points in the past year. We bought our home five years ago, 2008, for $400,000 and are being told now that it would only appraise for around $290,000. Somehow, this does not compute in our minds. How would you explain this apparent discrepancy in home values?
— George and Evelyn, Grand Junction

George and Evelyn,
First of all, Happy Fathers’ Day to all the fathers out there, whose presence and steady hand has provided the direction for not only your family, but the generations that will follow! Dads are not always appreciated like they should be, but especially today we should all thank dad and then thank mom for putting up with him! : )

On to your question, which is a very good one. I also saw the article about the nationwide price increases that are taking this country — if we are to buy into the media hype — by storm. There is no doubt a major housing recovery is afoot and we should all thank our lucky stars that the housing market appears to have reached bottom and is now showing good signs of life, as the housing industry is a very significant part of our nations GDP and thus a very good indicator or barometer of our country’s economic health.

You must first understand that these nationwide numbers are not reflective of any individual market. If you breakdown the 11.9 percent year-over-year increase, you would find that the majority of the price increases are occurring in major metro markets and most of those markets are not indicative of what we might expect here. It’s like when you take the diet pill and the bottle says, results may vary, well some people lose more weight than others. By the way, I always seem to get the results that varied! : ) The other issue at hand is, the majority of this price increase has occurred in lower-priced or more entry-level homes. With fewer foreclosures putting less downward pressure on prices and allowing the bottom end of the market to begin to recover, we should continue to see prices rise and have a trickle up effect into the mid range and higher price points over time. The national numbers are good for one thing and one thing only (in my mind) and that is to give us an overall indicator as to the health of our nation’s housing markets and housing industries as a whole. Do yourself a favor and don’t use them to help calculate your local home value.

One more note, when you hear that prices have increased 10 percent, you must remember that it is 10 percent of present value and not 10 percent of your home’s value at the peak. I know it sounds crazy, but many people hear 10 percent increase and figure that their once-$400,000 home that was valued at $280,000 last year has gone up $40,000. They are thinking about 10 percent of the peak value and the reality is, it went up $28,000. So when you hear that the Phoenix market is up 30 percent, you must realize that it dropped by 60 percent from its peak. For example, a $100,000 home value at the peak may have only been worth $40,000 last year and a 30-percent increase means it is up $12,000 or valued at $52,000. (Note that this is still nearly 50 percent off the peak value, even after a massive year-over-year 30-percent gain.) Pricing returns will take years, even with big jumps in values.

Bottom line, I hope this all made sense. In our market, the numbers I have seen show a year-over-year increase in the 4 to 5 percent range and I think we would be doing great to see that again between this spring and next! We are in recovery, but remember that as your home’s value recovers, so do all the other homes. When you buy and sell in the same market, it is all relative. If yours is going up, so is the one you are going to buy and visa versa. This was a wonderful question. Thank you.

Dave Kimbrough
The Kimbrough Team,
RE/MAX 4000, Inc

Do you have a question? Send it to .(JavaScript must be enabled to view this email address) and Dave Kimbrough will personally answer it in this space. Some questions may be more technical in nature than others and require more time to research. Due to volume we can’t guarantee a response to every question.

Check out most popular special sections!

734 S. Seventh St.
Grand Junction, CO 81501
970-242-5050; M-F 8:00 - 5:00
Subscribe to print edition
eTear Sheets/ePayments

© 2017 Grand Junction Media, Inc.
By using this site you agree to the Visitor Agreement and the Privacy Policy