Here is a map for the 27514 zipcode.
There are hardly any on the map. I'm surprised.
Compare that with 10 miles away in Durham
How can one interpret this?
a) Chapel Hill will be immune to the housing bust because the schools make it special.
b) Because foreclosures won't deflate the bubble, Chapel Hill's deflation will take a long time. But with Durham properties just up the road foreclosing, their prices will deflate. There will be a sharp price gradient between Durham and Chapel Hill, one that cannot be explained by Chapel Hill's schools (since that difference is already priced into the market). This price gradient will slowly erode Chapel Hill's prices.
What do I mean?
Let's say the school system allows Chapel Hill to command a 20% premium over Durham; a 100K house in Durham would cost 120K in Chapel Hill. This price difference existed before the bubble began. Both Durham and Chapel Hill see 75% appreciation during the bubble; the Durham house rises to 175K and the Chapel Hill house rises to 210K.
Now, due to foreclosure pressure, the Durham house returns to it's pre-bubble price of 100K, but the Chapel Hill property remains at 210K. Can Chapel Hill pretend that it should now command a 110% price premium over Durham?
So, I look at these two maps and I see depreciation in the future for both Durham and Chapel Hill; but Chapel Hill's depreciation will be slower. Terrific. We'll drag out the negative consequences of this stupid bubble for even longer.
2 comments:
I'll reiterate my view that Chapel Hill folks are rich enough to not sell at the real value. Durham folks, e.g., may have a job out of town and not enough money to leave the house 6mo more on the market to get the price they're looking for.
I haven't thought about it enough to connect the dots but CH does strike me as a generally irrationally exuberant area . . . since the metropolitan area is really RDU and CH isn't really an isolated market (and arguably there's a lot of professional migration into the area from other (relatively more expensive) cities. that could have something to do with it.
I imagine that a silicon valley professional used to bay area prices wouldn't necessarily scale down his or her irrational sense of value when house shopping in CH (it would probably feel like they were on supermarket sweep) :)
I mean to say that there is a cultural identity that strongly distinguishes CH from Durham, Cary, Raleigh, etc. Maybe there is enough of supply of wealthy purchasers who value that, making them more irrationally exuberant than the mean? Or I suppose the cultural "value" of living in CH could be increasing, buffering the rate of price decline? I am hesitant to say that too strongly since cultural explanations fail me every time, but we are talking as much about fashion as rationale when considering the avg. home purchaser.
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