Just as importantly, one may stay relatively hot while the other may stagnate or decline.
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.
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
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.