Now and Then

Chapel Hill houses increased in price dramatically in the last decade. These price increases coincided with a housing bubble in the rest of the country.

So the question that potential buyers have to ask themselves is this: were Chapel Hill's price increases due to the bubble or due to a change in the desirability of Chapel Hill?

Houses were affordable in Chapel Hill ten years ago.

One house near campus, on Roosevelt Drive sold for $234K in 2000. It's an 1800 sqft house with a very nice location. A modest house, not very large. That the house is currently asking $450K.

What does $234K get you in that neighborhood today? This 900 sqft condo.

How about this house on the eastern edge of Chapel Hill? New, it sold for $369K in 2003. This is an upper end house, with more than 3400 square feet. Today, it's asking $459K.

What does $359K get you in that neighborhood today? This house at half the size.

Houses used to be affordable. They stopped being affordable. If no one can afford to buy the houses, then no one will -- and houses will languish unsold on the market. A drop in sales volume, then, is indicative that prices are too high. Prices will only rise to what the market can bare. The market has not changed enough to bear the current prices. This year's low sales volume is evidence that sellers are asking too much.

If I were a buyer right now: I would wait to buy since I could buy more house for the same amount of money later. Prices will drop in Chapel Hill.

If I were a seller right now: I would make sure to undercut the price of my neighbors to sell my house as soon as possible. The longer you wait to sell your house, the lower it will sell for in the future. You're holding a declining asset. The longer you hold, the more damage it does to you financially.