Why a house may sell for less than it’s 2005 Value

You know there is a lot of talk about house prices falling and all.  I really think Lexington is pretty safe.  If you throw out distressed properties (foreclosures, short sales, etc.) the prices have been pretty flat for houses under $250k since about 2005.  Granted, there are exceptions.  Some neighborhoods have seen the smack of the correction.  To keep this a blog and not a dissertation, I will work towards my point.

When I have a buyer these days, I like to do a “Market Analysis” for today’s value and what it would have been worth in 2005.  I do it for them to show them how their neighborhood has weathered the storm so far.  I do it for myself because I think it is kind of fun.  Makes me look smart too!

I have also spent a lot of time this year looking for houses that have sold both in 2005 (end of the boom) and once since then.  Just about all the houses are selling for around what they did in 2005.  There are a few that have sold for less than they did during the boom  (I am getting closer to my point.)  The ones that sold for less usually did so because the newest owner got a house with older carpet, older appliances, an older roof, and older HVAC system, older water heater.

So, I guess my point really is that people shouldn’t freak when a house down the road from them sells for ten grand less than it did 3 year ago.  We have been spoiled by blind appreciation.  There is a lot of stuff in any house that has a limited economic life.  If you use it up for yourself and don’t leave much for the next owner, it will affect your sale price.  That doesn’t mean the house really depreciated though, just means you are crediting the new guy for the amount you used and didn’t have to replace.

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