By Mike Bodeen · 22 May 2023
This week’s chart, like most of the Cromford Report’s charts, is very interesting. It shows our market’s pricing per square foot (PSF) going back 9 years, including 2023.
If you begin at 2015 and continue through 2019, you would notice that, for the most part, those 5 years increased quite well in value and were fairly steady throughout the year. You would also observe the substantial home appreciation each year ending up at a $50 PSF rise in value ($130 to $180).
But along comes 2020 (burgundy) which was the beginning (March) of the COVID era. In that year the market started at $180 PSF and rose to the high 180’s, then when COVID became recognized as the Pandemic that it was, the market immediately responded by dropping for the next two months. This was to be expected given the international catastrophe.
But then, the radically unexpected happened. The market drop halted, and instead became a furious seller’s market that continued until May of 2022 – just one year ago.
What happened in May of 2022 is what we were expecting in 2020 – a radical drop in prices. And as you can see, values plummeted from about $307 PSF down to $267 PSF – a $40 PSF drop, or 12% – in just 8 months. The reason for the drop, was the creation of inflation, an economic word this country has not been concerned about for decades, which then increased mortgage rates which has stymied the market.
You’ll notice the gold line on the chart representing 2022 and the peak of the market one year ago which occurred in May. What happens if that outlier gold line is taken away? The result would be 8-9 years of consistent growth and radical price growth in the last few years.
For those who still maintain ownership of their home, the only ones who have suffered a loss of value in this entire stretch are those who purchased from March 1st 2022 until the beginning of September 2022 – a 6 month period.
In almost 9 years, there has only been a 6 month stretch that leaves those buyers with a value loss. But even then, it won’t be very long (a Bodeen opinion) before those buyers are ahead of the value curve as well.
Note the value arc which has been occurring since January of 2023. This will not stop anytime soon. Oh, there may be a month here or there which drops, just like in the past 9 years, but everything points to continued growth. Continued demand.
Market data referenced in this article comes from The Cromford Report.