Listing inventories are down year over year in the Carolinas. I credit this to two situations. The first is when the seller has made the conscious decision to pull their property off the market and wait. The second is that current Fair Market Value does not allow them enough equity to make their next move.

I sense that at least 40 percent of home sellers are still unrealistic about home value appreciation despite the recent economic downturn and volatility in the nation’s housing markets.

On a national level, home values declined for five consecutive years during the downturn. Since 1950, home values historically have tended to appreciate at an average of 2 percent to 5 percent per year. So we, as Americans, have been ingrained to believe that the value of our home will always rise. What is it that creates such an unrealistic view on home values – even now as much of the economy is still working hard to find its path?

I think part of the reason home buyers are so optimistic about values appreciating is because they truly believe in the value of homeownership. In their minds, owning a home is the ultimate economic security, the solace of old age and one that will return financial value to their lives in many ways. Because it is so valuable to us, we all are wishing and hoping for that “loving appreciation” feeling again! Trust me when I say that the bottom, saleswise, was last October. Sales units unfortunately have nothing to do with appreciation.  Supply and demand as well as shadow inventories still have a hold on appreciation, at least for the next year or so.  Even as the economy recovers, I predict that it is going to be a slow, methodical climb.

A friend of mine in the business says another reason is “leftover boom mentality.” What does this mean? Well, it reflects on the many buyers today who witnessed the insane appreciation seen during the 10-year housing boom. News headlines constantly read crazy stats like “Home values up 20 percent from a year ago.” I think that collectively, we got used to this and quickly lost sight of history, which shows home values increasing at a much slower pace.

Homeownership is a long-term play.  It is security, warmth and a shelter that should be made first and foremost as a way to provide a stable place to live. Secondly, it should be seen as a way to create financial security. Just as we cannot assume that values will continue to decline, we cannot assume that our home alone is our retirement.

Earlier this month, I spoke to a group of folks that are on the list to move into a continuing care retirement opportunity. My standard statement to sell low and buy low was not appropriate in this situation because they are not necessarily buying low. Their neighbors sold high and bought high, and it is all relative.  In that situation most of these folks are waiting until their property values come back up to 2006-2007 levels …  unrealistic for sure!  That could take years. The risks they are taking by waiting are that their place in line get may get filled or they may be unable to enter such a facility due to the state of their health at that time. What price might they have to pay if housing takes off, since the rise of housing may increase the cost of care facilities?

My stance is that we only know what the marketplace is now. Homes will appreciate again but at historic slow and steady paces, not like the boom times. If that’s the case the restart line for that 2 percent to 3 percent will be at today’s price, not the 2006 price!

That is again why we call it a MARKETPLACE!

By Pat Riley (President and Chief Operating Officer)