Seller Considerations – The 5% Appreciation Factor

 It looks like there may finally be light at the end of the tunnel. Many of the leading economists are predicting that prices in most parts of the country will stabilize this year. Consider the following projections:

– Mark Zandi, Chief Economist at Moody’s Analytics– “Despite the recent settlement with mortgage servicers which could add to already high inventory levels, investor demand will limit price declines to 5% this year.

– Neil Dutta, U.S. Economist, Bank of America-Merrill Lynch– Prices are likely to fall another 6-7% between now and the early 2013. The temporary lull in foreclosures has given the illusion that a bottom has been reached, but a foreclosure overhang of inventory is still widespread.  So what does this mean for homeowners and sellers that have been waiting for prices to rebound. Quite possibly, it means the road ahead may be long indeed.

Use the chart below to determine how long it may be before you see the price you want to get for your home based on the slight decline Zandi and Dutta are projecting for this year and next, followed by a recovery and the normal market average appreciation of 5% per year.

Market Price	2012 (-5%)	2013 (-2%)	2014 (+5%)	2015   (+5%)	2016 (+5%)	2017 (+5%)	2018 (+5%)	2019 (+5%)	2020 (+5%)
$100k	95,000	93,100	97,755	102,642	107,774	$113,163	118,821	124,762	131,001
$250K	237,500	232,750	244,387.50	256,606	269,437	282,909	297,054	311,907	327,502
$750K	712,000	698,250	733,162	769,820	808,311	848,727	891,163	935,721	982,507
$1Mil	950,000	931,000	977,550	1,026,427	1,077,748	1,131,636	1,188,218	1,247,629	1,310,010
$1.5Mil	1,425,000	1,396,500	1,466,325	1,539,641	1,616,623	1,697,454	1,782,327	1,871,443	1,965,015
$2Mil	1,900,000	1,862,000	1,955,100	2,052,855	2,155,497	2,263,272	2,376,436	2,495,258	2,620,020

 

A Seller can use the above chart, to determine how long it will take before they’re likely to reach the selling price that works for them. Once that is determined the next question should be “Do I really want to wait for another ____ years before I sell my home and move on with my life?”  The response to this questions is personal to each and every seller.

Many sellers during the past several years have found it more advantageous to sell and get on with the rest of their lives. This group reasons that Peace of Mind is Priceless.  In fact, depending how quickly the conclusion was reached, this group saved substantially by avoiding much of the price declines that occurred subsequent to their sale. Remember, relying on a future recovery and world economic stability is inherently risky.