106 Baskerville Circle in Durham County
Acknowledging that housing prices have increased over the last ten years, I have to counter the second of the two arguments home owners like to use to justify current prices:
Our area is better, so the appreciation is justified.
I have a funny story.
So, when I first started thinking about the housing bubble and how it related to Chapel Hill, I ran a quick google search and found this exchange on an internet forum. That's basically all google turned up besides the new Bubble Tea place on Franklin.
In that forum, about half way down the page, "Omamia" says she'd rather rent for a year and watch how the housing bubble plays out -- she's worried there would be a 20 or 30% decline in prices. "MrsSteel" respectfully disagrees. She responds that the reason that Chapel Hill is not experiencing a bubble is because of the *schools* -- "the very best in the area -- possibly in the entire state." According to MrsSteel, 20% declines will not happen.
What struck me as being so funny about that response was that a few days before I found this thread, I had been on the phone with my grandmother, who lives in Wilmington, Delaware. Her neighborhood also saw significant appreciation in the past ten years, and when I expressed concern for her over possible depreciation, she said that she wasn't worried about it. Why? The schools.
"The schools will save us" is a thought that comforts many people.
The problem with that logic is the same problem one might have with buying stock in Dell. Sure, Dell sells a lot of computers, but are they ever going to sell more computes than they are already? Is there reason to believe Dell's current sales expectations are not already built into the stock? Chapel Hill's schools might be better than Chatam county schools, so you would expect to pay a premium on a Chapel Hill house, but that premium was already built into the price of the Chapel Hill home before the housing bubble began. Appreciation during the bubble was not due to any feature of the area before the bubble began.
Fundamentally, appreciation is due to a *change* in the desirability of an area, not simply its desirability. In order to justify appreciation, one has to point at what has changed to make an area more desirable. Did incomes increase, did employment increase?
I will start looking for that data. I don't have the impression that incomes increased during the bubble years. The University is the largest employer in Chapel Hill proper, and I don't have the impression that they started paying higher salaries, or that they increased employment.
Maybe the triangle as a whole? RTP has been expanding, right? Maybe RTPs expansion has something to do with Chapel Hill's appreciation?
I don't believe this is the case and here's my flimsy data to back it up: Durham properties did not show the same appreciation Chapel Hill properties did. I would expect that RTP would have had a similar effect on Durham properties as they would on Chapel Hill properties; RTP is in Durham.
The Durham median-price line is the orange one that's pretty much flat (143K in 2005, 160K in 2008). I need to look harder to find a 10-year plot for Durham.
There are many Durham properties that are listing in the $130/sqft range -- I happen to have found this one because it turns up when you search for Chapel Hill on Realtor.com. How much of a premium should a Chapel Hill property command over a Durham property?
106 Baskerville Circle $131/sqft. Asking $369,000
*Update*
I'll weaken my own argument here: Durham county housing did appreciate during the bubbble; it looks like it saw a 50% appreciation in the last ten years. This is less than the appreciation Chapel Hill housing saw.
3 comments:
I wonder if the relative "stability" of appreciated prices is due to the relatively permanent presence of those who are wealthy enough to own nice homes in CH. Specifically, tenured faculty aren't going anywhere and are hence not desperate to sell a home and will not be as sensitive to market forces.
For a commercial parallel, consider the large amount of Franklin St. property which has been sitting idle for years. I've heard that most downtown property is owned by a very small number of people who are apparently wealthy enough to hold out rental until they get the price they want. Surely it is not a rational position, but nonetheless one they can afford to maintain.
Can't Chapel Hill imminent domain their asses? I hate the fact that Franklin street is half boarded up. If there weren't a Franklin street, Chapel Hill would be Cary -- a long extended suburb with no distinctive features. Creamy peanut butter.
And yet the Franklin street owners sit on their empty store fronts asking $75K/year in rent on land that can barely support $100K in gross sales.
(ugh, it looks like I can't edit my comments)
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