A Tale of Two Housing Markets: Hot and Not So Hot

http://www.oftwominds.com/blogdec16/hot-housing12-16.html

Just as importantly, one may stay relatively hot while the other may stagnate or decline.
All real estate is local, of course; there are thousands of housing markets if we consider neighborhoods, hundreds if we look at counties, cities and towns and dozens if we look at multi-city metro regions.
But consider what happens to average sales prices when million-dollar home sales are lumped in with $100,000 home sales. The average price comes in around $500,000– a gross distortion of both markets.
Here’s a real-world example of what has happened in hot markets over the past 20 years. The house in question is located in a bedroom community suburb in the San Francisco Bay Area metro area. The home was built in 1916 and has 914 square feet, no garage and a small lot.
It sold in 1996 for $135,000. This was a bit under neighborhood prices due to the lack of garage and small size, but nearby larger homes sold in the $145,000 to $160,000 range.
The house was sold in 2004 for $542,000, and again in 2008 for $575,000. It is currently valued at $720,000. The neighborhood average is $900,000.
According to the Bureau of Labor Statistics inflation calculator, inflation since 1997 has added 50% to the cost of living: $1 in 1997 equals $1.50 in 2016.