Real Estate Market Comparison June 7, 2008

We don't want to pick on anyplace, particularly when they are down, but we noticed that Merced, California is right at the bottom of the national ranking of 292 Metropolitan Statistical Areas (MSA) tracked by OFHEO for the lowest rate of house price appreciation in the first quarter of 2008 compared to the first quarter of 2007. The quarterly report by the Office of Federal Housing Enterprise Oversight was released May 22, 2008 and shows a national decline in home prices of 1.7% but Merced was #292 on the list with a decrease of 24.7%. And we don't even feel sorry for them.

Merced is a nice town of about 80,000 people right on Highway 99 in the Central Valley of California, a hundred miles southeast of the Bay Area. It has an annualized growth rate of 3.4% over the last nine years and is now home to the tenth campus of the University of California, which will eventually accommodate 25,000 students. In 2000 the median home price was $106,400 but this increased to $293,700 by 2005. According to OFHEO the five year HPI rate to 2005 was 141% and even after a slow 2006 the five year rate stood at 115% and now after a really slow 2007 the five year rate is down to 35.8%.

The situation is much the same in the four states - Nevada, California, Florida and Arizona - that showed the largest growth rate over the last five years as shown on the table and it seems to demonstrate that double digit increases in home values are simply not sustainable. In all cases the price appreciation has given way to a serious ‘price correction' but even then they are still way above the national average and five times what we have seen locally in the last five years.

	2003	2004	2005	2006	2007	5-Year
Nevada	11.9	32.4	18.0	4.0	-10.3	63.9
California	13.8	23.4	21.1	4.6	-10.6	56.3
Florida	11.3	18.8	26.8	9.5	-8.2	67.4
Arizona	7.5	14.5	34.9	9.6	-5.5	72.4
National	7.8	11.2	13.0	5.9	-1.7	38.9
Colorado	2.7	4.2	6.0	3.3	2.3	18.2
FTC/Loveland	3.9	2.9	3.8	0.9	0.9	12.8
Merced, CA	12.9	24.5	31.4	1.6	-24.7	35.8

You have heard the expression "slow and steady wins the race" and we certainly aren't winning any races but we think the numbers tell the story. It has been a long time since our local market experienced any double digit home price increases - 2000 to be exact - but this has certainly added some stability to our market and we have been able to show modest price increases even through the most recent double digit decline home sales.

Another item we would like to point out is that the OFHEO Home Price Index includes the Fort Collins and Loveland areas. Our multi list service breaks down the area to Fort Collins and northern Larimer County and Loveland and southern Larimer County. For the first quarter, the median price for the combined area was down 2.3% but it differed considerably from north to south with Fort Collins down 1.2% but Loveland down 6.7%. For the same five year period, the median price in Fort Collins is up 15.0% to $215,700 and in Loveland it is up 12.5% to $218,900. The reason Loveland shows a higher median price is simply the mix of residential housing. In the Fort Collins area about 20% of the homes are ‘multi family' townhomes and condos and this figure is less than 10% in Loveland.

The local sales figures for May will be available for our June 15, 2008 column. A preliminary look shows more of the same - a double digit decrease in home sales and a flat price point.

Pam & Dave Pettigrew, Real Estate Brokers and Certified Residential Specialists are available to answer your questions on real estate. Write to them at Prudential Rocky Mountain, REALTORS, 2700 S. College, Fort Collins, 80525, call them directly at (970) 282-9305 or email FCRealtor@msn.com. For an archive of past columns and market information visit their award winning web site at www.FortCollinsRelocation.com